Compliments  of 

The  Civic  Federation 

OF  CHICAGO. 
PLEASE     READ. 


THE 


STREET    RAILWAYS 


OF 


CHICAGO 


REPORT    OF   THE 

CIVIC    FEDERATION    OF    CHICAGO 


EDITED  BY 

MILO    ROY    MALTBffi,    PH.    D. 


ACCOUNTANT'S  REPORT  BY 
EDMUND     F.     BARD,     C.     ACCT. 


REPRINTED  FROM 

MUNICIPAL  AFFAIRS, 

J90J. 


Copyright  1901,  by  the  Reform  Club  Committee  on  City  Affairs, 
New  York. 


Ttie  civic  Federation  01  cnicaoo, 

215-216  FIRST  NATIONAL  BANK  BLDG. 


LA  VERNE  W.  NOYES,  President. 

JOHN  W.  ELA,  First  Vice-president. 

E.  G.  HALLE,  Second  Vice-President. 

WILLIAM  HORACE  BROWN,  Secretary. 
ISAAC  N.  PERRY,  Treasurer. 


EXECUTIVE    COMMITTEE. 

Franklin  H.  Head  Charles  G.  Dubois 

Franklin  Mac  Veagh  Sigmund  Zeisler 

E.  G.  Keith  A.  M.  Barnhart 

Josiah  L.  Lombard  H.  S.  Mecartney 

Wm.  A.  Giles  Hannah  G.  Solomon 

Adolph  Nathan  Wm.  R.  Harper 

R.  T.  Crane  Thos.  C.  Mac  Millan 

Paul  O.  Stensland  E.  M.  Ashcraft 

Adolph  Moses  Robert  McMurdy 

Sarah  Hackett  Stevenson  James  W.  Morrisson 

Newton  A.  Partridge 

AND  THE  OFFICERS. 

STREET    RAILWAY    FRANCHISE    COMMITTEE. 

Josiah  L.  Lombard,  Chairman  William  A.  Giles 
Franklin  H.  Head  Edmund  J.  James 

John  W.  Ela  *  Adolph  Nathan 

James  L.  Houghteling  Edwin  Burritt  Smith 

John  H.  Gray  Sigmund  Zeisler 

Newton  A.  Partridge  Zina    R.   Carter 

SUB-COMMITTEE    ON    INVESTIGATION. 

William  A.  Giles,  Chairman  Adolph  Nathan 

Josiah  L.  Lombard  Newton  A.  Partridge 

Edwin  Burritt  Smith  John  H.   Gray 


M2Q52Q1 


CONTENTS. 


REPORT  OF  COMMITTEE,     - 

ANALYSIS  OF  FINANCIAL  OPERATIONS, 

MILO  ROY  MALTBIE  7 

ACCOUNTANT'S  REPORT,     -                           EDMUND  F.  BARD  50 

EXHIBIT      I. — CHICAGO  CITY  RAILWAY  Co.,         -  50 

EXHIBIT    II. — NORTH  CHICAGO  CITY  RAILWAY  Co.,                  -  84 

EXHIBIT  III. — NORTH  CHICAGO  STREET  RAILROAD  Co.,       -  100 

EXHIBIT  IV. — CHICAGO  PASSENGER  RAILWAY  Co.,                     -  114 

EXHIBIT    V. — CHICAGO  WEST  DIVISION  RAILWAY  Co.,  123 
EXHIBIT  VI. — WEST  CHICAGO  STREET  RAILROAD  Co.,    -        -128 

FRANCHISE  VALUES  AND  COMPENSATION,  161 


STREET  RAILWAYS   OF  CHICAGO. 
To  THE  Civic  FEDERATION  OF  CHICAGO: 

Your  committee  appointed  to  conduct  an  examination  of  the 
true  financial  condition  of  the  Street  Railways  of  Chicago,  so  far 
as  the  same  is  shown  by  the  books  of  account  and  corporate  records 
of  the  various  street  railway  companies,  beg  leave  to  report : 

Immediately  upon  their  appointment,  your  committee  took  up 
and  pressed  the  negotiations  then  pending  to  obtain  access  to  the 
corporate  records  and  books  of  account,  with  the  result  that  Mr. 
Edmund  F.  Bard,  an  expert  accountant  of  this  city,  was  employed 
to  make  the  examination,  the  details  of  which  are  embodied  in  his 
report  herewith  submitted.  The  report  speaks  for  itself  and  bears 
evidence  of  the  ability  and  fidelity  with  which  the  work  was  done. 

This  examination  could  not  have  been  had  without  the  consent 
and  active  co-operation  of  the  street  railway  companies  themselves, 
and  full  recognition  is  given  to  the  courtesies  extended  and  the 
service  thus  rendered  by  their  officials  to  your  committee,  the  Civic 
Federation  and  the  public  generally. 

The  question  of  compensation  for  franchises  must  necessarily 
turn  on  some  plan  of  profit  sharing,  for  it  is  only  the  excess  of 
profit  remaining  after  payment  of  all  proper  operating  and  mainte- 
nance charges,  together  with  reasonable  returns  on  the  investment, 
which  can  justly  be  demanded  by  the  public.  The  first  question 
is,  therefore,  what  is  the  amount  of  actual  profit. 

This  preliminary  investigation  is  the  one  to  which  your  com- 
mittee has  addressed  itself.  We  believe  no  similar  publication  of 
facts  has  ever  been  made,  for  the  reason  that  never  before  have 
street  railway  books  been  opened  to  a  similar  investigation. 

Among  the  most  important  facts  involved  in  the  problem  under 
consideration  must  be  the  amount  of  capital  invested ;  the  mode  of 
issuing  the  stock,  bonds  and  other  securities  of  the  companies ;  the 


6  MUNICIPAL    AFFAIRS. 

mode  of  charging  expenditures  and  to  what  extent  rebuilding  is 
charged  to  construction  or  capital  account;  the  leases  or  other 
agreements  existing  between  different  companies ;  the  amount  of 
dividends  which  have  been  paid ;  the  gross  and  net  income ;  the  cost 
of  property  used  in  operating  street  railways ;  the  present  value  of 
such  property;  and  others  which  will  readily  occur. 

Obviously,  it  is  only  from  the  books  and  records  of  the  com- 
panies that  many  of  these  facts  can  be  ascertained  at  all;  and  it 
seems  that  not  all  of  them  have  ever  been  fully  ascertained  even 
by  the  companies  themselves,  previous  to  this  examination. 

Your  committee  had  the  report  of  Mr.  Bard  in  hand  early  in 
1899,  but  it  was  embarrassed  by  the  extreme  desirability  of  having 
the  report  accompanied  when  published  by  such  summaries,  ex- 
planatory matter,  etc.,  as  would  render  it  more  easily  understood 
and  thus  increase  its  usefulness.  Besides,  in  the  opinion  of  your 
committee,  it  is  mainly  with  reference  to  formulating  ordinances 
relating  to  the  street  railways  of  Chicago,  and  particularly  to  re- 
newals of  the  ordinances  soon  to  expire  by  limitation  rather  than 
the  framing  of  statutes  to  be  passed  by  the  legislature,  that  this 
information  is  most  pertinent  and  valuable. 

It  is  a  subject  of  sincere  congratulation  that  your  committee 
has  secured  the  services  of  Dr.  Milo  Roy  Maltbie,  Editor  of 
MUNICIPAL  AFFAIRS,  and  a  well-known  writer  on  municipal  and 
economic  subjects,  to  prepare  the  accompanying  summary.  While 
the  particular  views  expressed  by  him  are  his  own,  we  feel  sure 
they  will  carry  added  weight  for  that  reason.  The  committee  does 
not  think  it  desirable,  however,  at  this  time  to  formulate  any  policy 
nor  to  adopt  any  of  the  inferences  drawn  from  the  facts  disclosed. 
Those  facts  it  deems  weighty  and  important  and  their  present  pub- 
lication timely.  This  report  is  submitted  in  the  full  confidence 
that  it  will  aid  in  the  solution  and  the  speedy,  just  and  final  settle- 
ment of  a  situation  not  satisfactory  at  present  from  any  point  of 
view,  and  one  which  is  intolerable  in  many  of  its  phases. 
Respectfully  submitted. 

WILLIAM  A.  GILES,  Chairman; 
ADOLPH  NATHAN, 
JOSIAH  L.  LOMBARD, 
JOHN  H.  GRAY, 
NEWTON  A.  PARTRIDGE. 


ANALYSIS    OF    FINANCIAL    OPERATIONS 


BY    MILO    ROY    MALTBIE. 

The  examination  of  the  books  of  account  and  records  of  the 
principal  street  railway  companies  of  Chicago  made  by  Mr.  Edmund 
F.  Bard  is  altogether  unique.  I  know  of  no  other  instance  in  the 
United  States  where  a  street  railway  company  voluntarily  has 
opened  its  books  and  permitted  an  expert  accountant  to  examine  in 
detail  all  its  financial  operations.  For  the  first  time,  the  inner  work- 
ings of  several  large  companies  in  a  large  and  important  city  are 
brought  to  view.  For  the  first  time,  we  know  exactly  what  it  has 
cost  to  construct  different  kinds  of  street  railways,  what  allowance 
has  been  made  for  depreciation,  what  franchises  are  worth,  how 
they  have  been  capitalized,  what  methods  have  been  adopted  in 
financing  these  enterprises,  etc. 

To  comprehend  the  full  value  and  importance  of  this  study,  a 
brief  account  of  the  street  railway  situation  in  Chicago  and  of  the 
circumstances  under  which  the  examination  of  the  books  was  per- 
mitted, is  necessary. 

Early  Operations. 

Street  railways  were  first  operated  in  Chicago  in  1859.  A  period 
of  slow  development  followed,  during  which  all  street  cars  were 
operated  by  animal  power,  except  a  few  suburban  steam  dummy 
lines,  with  the  consequent  inadequate  service  and  high  operating 
cost.  It  was  not  until  1880  that  serious  steps  were  taken  to 
improve  the  service  by  the  adoption  of  cable  traction. 

At  this  time  there  were  three  companies  operating  in  three  quite 
distinct  parts  of  the  city,  viz. :  (i)  the  Chicago  City  Railway  Com- 
pany on  the  South  Side,  that  portion  of  the  city  lying  south  of  the 
river  and  east  of  the  south  branch;  (2)  the  North  Chicago  City 
Railway  Company  on  the  North  Side,  north  of  the  river  and  east  of 
the  north  branch,  and  (3)  the  Chicago  West  Division  Railway  Com- 
pany on  the  West  Side,  west  of  the  north  and  south  branches. 


8  MUNICIPAL   AFFAIRS. 

Each  had  a  monopoly  in  its  area,  due  partially  to  the  topographical 
nature  of  the  city  and  partially  to  agreement,  tacit  or  otherwise. 
The  river  has  always  rendered  communication  between  the  three 
sections  difficult  and  expensive.  The  natural  course  of  traffic  is  to 
and  from  the  center  of  the  city  along  radial  lines,  very  few  persons 
wishing  to  pass  between  the  West  and  South  Sides  or  the  West  and 
North  Sides.  (See  Exhibit  I,  §  9.) 

The  Chicago  City  Railway  Company  was  the  first  to  adopt  cable 
traction,  being  forced  to  do  so  by  the  competition  of  steam  roads 
which  paralleled  its  main  lines.  The  State  Street  and  Cottage 
Grove  Avenue  lines  were  the  first  converted,  beginning  about  Janu- 
ary i,  1881.  The  other  companies  began  to  adopt  mechanical 
traction  several  years  later — 1886  and  1887.  Early  in  the  nineties 
electricity  was  introduced  and  now  the  horse  railroad  has  almost  dis- 
appeared, and  the  cable,  once  so  common,  is  giving  way  to  the 
trolley. 

Duration  of  Franchises. 

The  three  roads  above  named,  and  others  subsequently  organ- 
ized, secured  most  of  their  present  franchises  to  use  the  streets  in 
the  seventies  or  eighties,  for  periods  not  exceeding  twenty  years,  the 
legislative  act  of  1874  having  fixed  this  as  the  maximum  limit.  The 
most  sweeping  city  ordinance  was  that  of  July  30,  1883,  which  ex- 
tended all  of  the  existing  franchises  to  use  the  streets  to  1903.  Sev- 
eral other  ordinances  have  since  been  passed,  notably  in  1886  and 
1887,  but  almost  without  exception  the  periods  have  so  been  fixed 
as  to  terminate  in  1903,  1906,  1907,  or  thereabouts.  In  some  cases 
no  limit  was  stated,  and  the  city  may  terminate  these  franchises  at 
any  time. 

The  only  exception  to  the  rule  that  street  railway  franchises 
have  been  granted  for  short  periods,  usually  about  twenty  or 
twenty-five  years,  is  the  "Ninety-Nine-Year"  Act  passed  in  1865. 
This  Act  extended  the  life  of  the  Chicago  City  Railway  Co.,  the 
North  Chicago  City  Railway  Co.  and  the  Chicago  West  Division 
Railway  Co.  to  ninety-nine  years,  the  act  of  incorporation  passed  in 
1859  having  restricted  it  to  twenty-five  years.  It  also  attempted 
apparently  to  extend  the  franchises  to  use  the  streets  already 
granted  to  ninety-nine  years,  but  the  language  is  not  explicit.  It 
certainly  was  not  intended  to  include  all  subsequent  grants  made  by 


CHICAGO   STREET   RAILWAYS.  9 

the  city.  Thus,  under  the  interpretation  most  favorable  to  the  com- 
panies, there  are  only  a  few  franchises  to  use  the  streets,  most  fran- 
chises having  been  granted  since  1865,  which  could  by  any  possi- 
bility run  on  until  1958,  and  if  the  courts  should  strictly  construe  the 
Ninety-Nine- Year  Act,  all  would  terminate  at  dates  not  more  re- 
mote than  1916,  most  of  them  about  I9O3/ 

Legislation  Attempted. 

The  situation  in  1897  was  briefly  this:  Most  of  the  franchises 
were  to  expire  in  ten  years  or  less.  The  cable  roads  needed,  or 
soon  would  need,  to  be  replaced  by  electric  lines.  But  of  course 
capitalists  would  not  furnish  the  requisite  funds  upon  such  short- 
term  franchises.  Furthermore,  unless  the  periods  were  extended, 
the  price  of  the  securities  would  soon  begin  to  decline,  gradually 
reaching  a  very  low  figure.  Also,  the  political  situation  seemed 
favorable  to  the  companies;  the  council  and  the  legislature  were 
apparently  friendly. 

Bills  were  introduced  into  the  legislature,  currently  known  as 
the  Humphrey  bills,  extending  for  fifty  years  the  franchise  rights 
granted  by  city  ordinances,  giving  the  companies  many  valuable 
privileges  and  requiring  in  return  very  little  from  the  companies 
either  in  the  way  of  compensation  or  public  control.  The  corpora- 
tions at  first  seemed  to  have  the  necessary  support  to  enact  the 
measures,  but  popular  feeling  ran  so  high  that  it  influenced  many 
members  of  the  legislature,  and,  after  a  very  bitter  fight,  the  bills 
were  voted  down  by  a  large  majority. 

The  street  railway  interests  then  tried  a  new  measure,  the  Allen 
bill,  which  contained  some  of  the  most  objectionable  features  of  the 
Humphrey  bill,  but  which  was  an  improvement  in  other  respects.1 
This  bill  became  a  law  in  the  summer  of  1897.  In  November,  1898, 
elections  were  held  for  seats  in  the  legislature,  and  the  whole  State 
was  so  worked  up  by  the  prostitution  of  public  interests  for  the 

'The  roads  have  been  so  unsuccessful  in  getting  statutes  or  ordinances  ex- 
tending their  franchise  rights  in  the  streets  that  they  now  are  attempting  to  get 
a  judicial  interpretation  of  the  Act  of  1865,  and  claim  that  the  99-year  clause 
applies  to  all  franchise  rights.  No  one  else  believes  this,  but  it  may  be  that  the 
courts  will  hold  that  it  applies  to  all  grants  previous  to  1865,  which  will  leave  the 
roads  a  few  important  franchises. 

*The  principal  difference  between  the  two  bills  was  that  the  Humphrey  bill 
itself  extended  the  franchise  rights  of  the  companies  50  years;  the  Allen  bill 
authorized  city  authorities  to  do  this. 


1«  MUNICIPAL    AFFAIRS. 

aggrandizement  of  a  few  corporations  that  nearly  every  man  who 
had  supported  the  Humphrey  and  Allen  bills  was  either  refused  a 
renomination  or  defeated  at  the  polls.  The  legislature  which  met 
the  following  winter — 1899 — repealed  the  Allen  law  by  a  prac- 
tically unanimous  vote  before  the  Chicago  companies  had  derived 
any  benefit  therefrom.  The  city  council  refused  to  exercise  the 
power  conferred  by  the  Allen  law  and  extend  franchises  fifty  years. 
Thus,  in  1899,  the  street  railroad  interests  were  precisely  where 
they  were  in  1896,  and  there  was  little  prospect  of  getting  favors 
from  the  legislature  or  the  city  council.  The  public  was  extremely 
hostile  and  suspicious ;  the  council  was  no  longer  controlled  by  "the 
gang,"  and  the  legislature  had  been  taught  a  lesson  it  was  not  likely 
soon  to  forget.  Evidently  the  companies  were  hard  pressed;  and 
only  five  years  remained  before  the  expiration  of  many  of  their 
franchises. 

All  of  this  experience  had  taught  the  companies  that  the  public 
could  no  longer  be  disregarded.  Conditions  had  greatly  changed, 
and  the  policy  of  the  corporations  must  change  also. 

The  Scope  of  the  Investigation. 

In  June,  1898,  after  the  enactment  of  the  Allen  law  and  after  the 
•city  council  had  refused  to  accede  to  the  demands  of  the  companies 
for  an  extension  of  franchises,  the  Civic  Federation  invited  Mr. 
C.  T.  Yerkes,  who  controlled  the  North  and  West  Side  companies 
and  who  was  the  spokesman  for  these  companies  in  the  contro- 
versy, to  give  an  address  at  a  public  meeting  on  the  street  railway 
situation.  He  complied  and  evinced  a  strong  desire  to  placate  the 
public  and  to  secure  co-operation  in  formulating  and  procuring  the 
needed  ordinances.  Mr.  Newton  A.  Partridge,  who  was  principal 
spokesman  for  the  Civic  Federation,  insisted  that  the  city  could  not 
be  expected  to  go  into  a  blind  pool  and  approve  a  plan  suggested 
by  the  street  railway  companies  when  all  of  the  data  regarding  the 
operations  of  the  companies  were  unknown  to  it.  That  would  be 
playing  with  loaded  dice.  If  fair  treatment  were  to  be  expected, 
after  the  public  had  been  so  shamefully  abused  and  deceived  in  the 
two  years  just  passed,  the  books  of  the  companies  must  be  opened 
to  examination  by  an  expert. 

This  Mr.  Yerkes  subsequently  consented  to  do,  recognizing  the 
logic  of  the  argument.  A  committee  of  the  Civic  Federation  was 


CHICAGO    STREET    RAILWAYS.  11 

appointed,  consisting  of  Josiah  L.  Lombard  (chairman),  Adolph 
Nathan,  Newton  A.  Partridge,  Sigmund  Zeisler,  William  A.  Giles, 
John  H.  Gray,  Paul  O.  Stensland,  Edwin  Burritt  Smith,  Thos.  C. 
MacMillan,  E.  G.  Keith,  Franklin  MacVeagh,  Zina  R.  Carter,  John 
W.  Ela  and  Wm.  K.  Ackerman.  This  committee  was  reorganized 
in  1900  with  the  following  members :  Josiah  L.  Lombard  (chair- 
man), William  A.  Giles,  Adolph  Nathan,  Franklin  H.  Head,  John 
H.  Gray,  James  L.  Houghteling,  Newton  A.  Partridge,  Edwin  Bur- 
ritt Smith,  Sigmund  Zeisler,  Edmund  J.  James,  Zina  R.  Carter  and 
John  W.  Ela.  The  sub-committee,  which  had  direct  management 
and  supervision  of  the  investigation  and  which  signs  this  report, 
consisted  of  William  A.  Giles  (chairman),  Adolph  Nathan,  Josiah 
L.  Lombard,  Newton  A.  Partridge  and  John  H.  Gray. 

Mr.  Yerkes  did  not  speak  for  the  Chicago  City  Railway  Co.,  as 
he  did  not  control  this  road,  but  when  it  was  found  that  the 
other  lines  were  to  open  their  books,  the  South  Side  company 
agreed  to  do  the  same.  Mr.  Edmund  F.  Bard,  a  professional  ac- 
countant, immediately  began  work,  and  the  results  of  his  investiga- 
tions are  Exhibits  I.  to  VI.  He  had  access  to  the  books  of  account 
and  corporation  records  of  all  the  important  surface  roads.  Sev- 
eral of  the  suburban  lines  recently  constructed  are  not  included,  as 
they  have  been  in  operation  only  a  short  time.  These  are  relatively 
unimportant,  as  their  business  is  small,  and  the  companies  treated 
herein  hold  the  key  to  the  whole  situation.  Mr.  Bard's  report  cov- 
ers the  Chicago  City  Railway  Co.,  the  North  Chicago  City  Rail- 
way Co.,  the  North  Chicago  Street  Railroad  Co.,  the  Chicago  West 
Division  Railway  Co.,  the  Chicago  Passenger  Railway  Co.  and  the 
West  Chicago  Street  Railroad  Co.  It  ends  with  December  31, 
1897 — the  last  year  for  which  complete  data  were  available  when  he 
began  his  work.  To  bring  the  monograph  down  to  date — July  I, 
1901 — the  facts  for  the  last  three  years  and  a  half  have  been  gath- 
ered from  the  financial  papers,  principally  the  Economist.  How- 
ever, few  changes  have  been  made  since  January  i,  1898,  and  they 
do  not  materially  alter  the  figures  Mr.  Bard  gives  for  1897. 

Face  Value  of  Liabilities. 

(Of  all  the  many  facts  established  by  this  examination,  those 
bearing  upon  the  value  of  the  franchises  will  be  most  eagerly  sought 


12  MUNICIPAL   AFFAIRS. 

for.  To  compute  this  value  one  first  finds  the  market  value  of  all  out- 
standing liabilities,  or,  in  other  words,  the  sum  which  must  be  ex- 
pended in  order  to  gain  complete  control  of  the  companies.  It  is 
evident  that  this  can  be  done  only  by  purchasing  at  market  value 
all  outstanding  stock,  bonds  and  other  evidences  of  indebtedness. 
From  the  amount  thus  expended  there  must  be  subtracted  the 
market  value  of  all  assets,  or  the  sum  which  one  would  receive  if  all 
the  properties  except  the  franchises  were  sold.  The  remainder 
evidently  is  the  market  value  of  the  franchise. 

The  liabilities  of  the  various  companies  July  I,  1901,  were  as 
follows : 

CHICAGO  CITY  RAILWAY  COMPANY 

Capital  stock $18,000,000.00 

Miscellaneous    obligations 232,488.22 

Total    $18,232,488.22 

CHICAGO    UNION   TRACTION    COMPANY/ 

Capital  stock,  preferred $12,000,000.00 

Capital  stock,  common 20,000,000.00 

Miscellaneous  accounts  payable 2,233,165.00 

Total    $34,233,165.00 

NORTH   CHICAGO   CITY   RAILWAY  COMPANY. 

Capital  stock $500,000.00 

Bonds,  4^2  and  4  per  cent 2,997,000.00 

Due  North  Chicago  Street  R.  R.  Co 6,172,331.89 

Total    $9,669,331.89 

NORTH    CHICAGO   STREET  RAILROAD   COMPANY. 

Capital    stock $7,920,000.00 

First  mortgage  bonds,  5  per  cent 4,800,000.00 

Bills  payable 1,196,200.00 

Miscellaneous  accounts 9i,395.o8 

Total    $14,007,595.08 

CHICAGO  PASSENGER  RAILWAY  COMPANY. 

Capital   stock $1,340,300.00 

Bonds,  5  and  6  per  cent 1,734,000.00 

Due  West  Chicago  Street  Railroad  Co 49,158.49 

Total  $3,123,458.49 


xThe  Chicago  Union  Traction  Co.  has  not  been  examined  by  Mr.  Bard,  as  it 
was  organized  after  he  made  his  investigation.  These  items  have  been  taken 
from  the  company's  report,  as  published  in  the  Investors'  Manual  for  1901.  The 
published  statement  of  June  30,  1901,  does  not  give  assets  or  liabilities.  The 
figures  given  cannot  be  far  from  accurate,  however. 


CHICAGO   STREET   RAILWAYS.  13 

CHICAGO   WEST  DIVISION  RAILWAY  COMPANY. 

Capital   stock $1,250,000.00 

First  mortgage  bonds 4,070,000.00 

Due  West  Chicago  Street  Railroad  Co 4,869,908.38 

Total $i  o,  1 89,998.38 

WEST  CHICAGO    STREET  RAILROAD  COMPANY. 

Capital    stock $13,189,000.00 

First  mortgage  and  consolidated  bonds,  5  per  cei         10,000,000.00 
Bills  payable,  4l/3  per  cent,  miscellaneous 5,169,252.67 

Total    $28,358,252.67 

A  total  face  value  of $117,814,289.73 

Market  Value  of  Securities. 

Proceeding  now  to  find  the  value  of  these  securities,  the  first 
question  that  arises  is,  What  date  shall  be  taken  at  which  to  com- 
pute their  market  value  ?  In  this  resume  I  have  attempted  to  make 
it  complete  to  July  i,  1901,  which  would  suggest  the  selection  of 
that  date.  But  the  quotations  for  one  day  may  not  represent  the 
true  state  of  the  market.  To  avoid  this  error,  the  Stock  Exchange 
quotations  for  the  first  two  weeks  in  July  have  been  used.  This 
period  is  particularly  well  suited  for  the  purpose,  as  the  market 
was  normal,  showing  no  marked  fluctuations,  and  as  the  period  was 
one  neither  of  boom  prices  nor  marked  depression. 

The  prices  secured  by  averaging  the  stock  quotations  for  this 
period  are:  Chicago  City  Railroad  Co.,  209;  Union  Traction  Co., 
preferred,  60;  common,  19;  North  Chicago  Street  Railroad  Co., 
200;  West  Chicago  Street  Railroad  Co.,  100.  The  stocks  of  three 
companies  were  not  dealt  in  during  July  1-13,  but  accepting  the 
prices  used  in  the  Harlan  report,  which  is  considered  very  conserva- 
tive, we  have:  North  Chicago  City  Railway  Co.,  600;  Chicago 
West  Division  Railway  Co.,  650;  Chicago  Passenger  Railway  Co., 
100. 

Computing  market  values  at  these  figures,  the  liabilities  of  the 
Chicago  City  Railway  Co.  are  worth  $37,852,488.22,  those  of  the 
Chicago  Union  Traction  Co.  $13,233,165,  in  each  case  accepting  the 
miscellaneous  obligations  at  their  face  value. 

In  the  case  of  the  North  Chicago  City  Railway  Co.  only  2,499 
shares  of  stock  are  to  be  valued,  as  the  purchase  of  the  stock  and 
bonds  of  the  Chicago  Union  Traction  Co.  would  itself  transfer  2,501 
shares  which  this  company  took  over  from  the  North  Chicago 
Street  Railroad  Co.,  when  it  made  the  agreement  of  1899.  (See 


14  MUNICIPAL    AFFAIRS. 

infra.)  These  shares,  together  with  the  other  obligations  taken  at 
par,  have  a  market  value  of  $10,668,731.89. 

The  Chicago  Union  Traction  Co.  also  owns  $2,000,000  of  stock 
in  the  North  Chicago  Street  Railroad  Co.  The  market  value  of 
the  remaining  59,200  shares  would  be  $11,840,000.  Adding  the 
ether  liabilities  at  face  value,  we  have  a  total  of  $17,927,595.08. 

Turning  to  the  West  Side  roads,  the  liabilities  of  the  Chicago 
Passenger  Railway  Co.  amount  to  $2,393,458.49.  Seven  thousand 
three  hundred  shares  of  stock  are  owned  by  the  Chicago  Union 
Traction  Co.,  which  would  be  purchased  with  the  stock  and  bonds 
of  that  company,  leaving  6,103  to  be  valued  at  $100  per  share,  or 
$610,300.  The  bonds,  bearing  5  and  6  per  cent,  interest,  are  worth 
more  than  par,  but  their  face  value  has  been  taken. 

The  Chicago  West  Division  Railway  Co.  has  liabilities  yet  out- 
standing valued  at  $13,001,848.38;  6,251  shares  of  its  stock  being 
owned  by  the  Chicago  Union  Traction  Co.,  and  the  bonds  being 
taken  at  par,  although  selling  at  a  premium. 

Of  the  West  Chicago  Street  Railroad  Co.'s  stock,  $3,200,000 
are  owned  by  the  Chicago  Union  Traction  Co.  This  would  leave 
99,890  shares  at  $100  per  share,  or  $9,989,000,  plus  $15,169,252.67 
in  other  liabilities  at  par  value,  or  a  total  of  $25,158,252.67. 

MARKET    VALUE   OF   LIABILITIES. 

Chicago  City  Railway  Co $37,852,488.22 

Chicago  Union  Traction  Co 13,233,165.00 

North  Chicago  City  Railway  Co 10,668,731-89 

North  Chicago  Street  Railroad  Co I7,927»595«o8 

Chicago    Passenger    Railway   Co 2,393,45849 

Chicago  West  Division  Railway  Co 13,001,848.38 

West  Chicago  Street  Railroad  Co 25,158,252.67 

Total    $I20,235,539731 

Value  of  Assets. 

From  this  amount  one  must  subtract  the  present  value  of  all 
property,  real  and  personal,  except  the  franchise  rights  in  the 
streets. 

After  careful  analyses  of  the  accounts,  Mr.  Bard  computes  the 
total  original  cost  of  all  property  belonging  to  the  six  companies,  exdu- 

*This  is  a  very  conservative  estimate.  The  bonds  have  been  computed  at  par, 
whereas  the  latest  quotations  showed  a  premium  in  almost  every  instance.  The 
assumed  market  values  of  stocks  are  below  what  they  have  been  selling  for.  But 
it  is  better  to  give  the  companies  the  benefit  of  all  reasonable  doubts  than  to 
retard  private  enterprise  by  harsh  treatment 


CHICAGO    STREET    RAILWAYS.  15 

sive  of  the  franchises,  upon  December  31,  1897,  at  $41,328,379.72,  dis- 
tributed as  follows  i1 

Chicago    City    Railway    Co $i  1,603,960.71 

North  Chicago  City  Railway  Co 4,616,909.47 

North    Chicago    Street    Railroad    Co 6,060,777.00 

Chicago   Passenger  Railway  Co 1,677,411.29 

Chicago  West  Division  Railway  Co 5,783,713.65 

West  Chicago  Street  Railroad  Co -.  11,585,607.60 

Total    $41,328,379.72 

In  order  to  bring  these  calculations  up  to  date,  I  have  incor- 
porated the  changes  made  since  January  i,  1898,  which  are  few  and 
quite  accurately  known.  They  consist  principally  in  the  organiza- 
tion of  a  new  company — the  Chicago  Union  Traction  Co. — the  re- 
funding of  a  small  amount  of  indebtedness  and  the  construction  of 
a  small  amount  of  electric  road.  With  these  changes,  which  alter 
but  one  item  and  add  a  new  one,  I  find  that  upon  July  i,  1901,  the 
total  original  cost  of  all  property  except  the  franchises  was  $44,922,- 
011.72,  apportioned  as  follows: 

Chicago  City  Railway  Co 12,984,460.71 

Chicago  Union   Traction  Co ^2,213, 132.00 

North  Chicago  City  Railway  Co 4,616,909.47 

North  Chicago  Street  Railroad  Co 6,060,777.00 

Chicago  Passenger  Railway  Co 1,677,411.29 

Chicago  West  Division  Railway  Co 5,783,713.65 

West  Chicago  Street  Railroad  Co 11,585,607.60 

Total    $44,922,011.72 

But  in  this  suppostitious  process  of  buying  all  liabilities  and 
of  selling  all  property  three  cash  payments  would  be  made  from 
one  company  to  another,  which  are  not  included  in  the  assets  above, 
as  Mr.  Bard  shows  that  they  have  nothing  to  secure  them  except 
franchises,  so  that  the  assets  of  two  companies  would  be  larger 
than  indicated  in  these  tables.  I  refer  to  $6,172,331.89  due  the 
North  Chicago  Street  Railroad  Co.  by  the  North  Chicago  City  Rail- 
way Co.;  $49,158.49  due  the  West  Chicago  Street  Railroad  Co.  by 
the  Chicago  Passenger  Railway  Co. ;  and  $4,869,998.38  due  the  same 
road  by  the  Chicago  West  Division  Railway  Co.  These  payments 
would  alter  the  assets  somewhat,  giving  the  following  results : 

*In  valuing  the  assets,  every  piece  of  property  has  been  included  except 
franchises.  Thus  the  above  items  include  not  only  the  value  of  the  plant  and 
equipment  necessary  to  operate  the  road,  but  stocks  and  bonds  owned,  accounts 
receivable,  cash  on  hand,  etc.  I  will  return  to  this  point  later. 


16  MUNICIPAL   AFFAIRS. 

ORIGINAL  COST  VALUE  OF  FINAL  ASSETS  JULY    I,   IQOI. 

Chicago  City  Railway  Co $12,984,460.71 

Chicago  Union  Traction  Co.1 2,213,132.00 

North  Chicago  City  Railway  Co 4,616,909.47 

North  Chicago  Street  Railroad  Co 12,233,108.89 

Chicago  Passenger  Railway  Co 1,677,411.29 

Chicago  West  Division  Railway  Co 5*783,713.65 

West  Chicago  Street  Railroad  Co 16,504,764.47 


Total $56,013,500.48 

But  these  computations  allow  nothing  for  depreciation  since 
"original  costs"  were  expended.  Of  course,  the  books  show  nothing 
as  to  what  this  depreciation  would  be,  and  it  is  possible  only  to  make 
a  rough  estimate.  This  I  have  done,  always  keeping  well  within 
conservative  bounds.  The  estimated  present  market  value  of  all  prop- 
erty, exclusive  of  franchises,  is  $34,750,000,  or  $45,841,488.76  if  one 

include  the  amounts  due  from  company  to  company.2 

Amounts  includ'g 
Inter- Company 
Obligations. 

Chicago  City  Railway  Co $9,800,000  $9,800,000.00 

Chicago  Union  Traction  Co 2,000,000  2,000,000.00 

North  Chicago  City  Railway  Co 2,300,000  2,300,000.00 

North  Chicago  Street  Railroad 5,250,000  11,422,331.89 

Chicago  Passenger  Railway  Co 1,300,000       \  1,300,000.00 

Chicago  West  Division  Railway  Co 4,000,000  4,000,000.00 

West  Chicago  Street  Railroad  Co 10,100,000  15,019,156.87 

Total    $34,750,000  $45,841,488.76 

Value  of  Franchises. 

Deducting  these  amounts  from  the  value  of  the  liabilities  as 
computed  above,  we  have : 

Value  of  liabilities,  July  I,  1901 $120,235,539.73 

Original  cost  value  of  assets,  as  corrected 56,013,500.48 

Value  of  franchises,  upon  basis  of  original  cost.       $64,222,039.25 

Value  of  liabilities,  July  I,  1901 $120,235,539.73 

Estimated  present  value  of  assets 45,841,488.76 

Value  of  franchise r .  / $74,394,050.97 

'This  figure  is  for  July  I,  1900. 

'Attention  is  called  to  the  fact  that  I  am  here  speaking  of  "assets,"  not  "plant" 
nor  "productive  assets,"  but  all  assets,  whether  they  have  or  have  not  any  value  at 
present 


CHICAGO    STREET   RAILWAYS.  17 

This  amount  represents  the  minimum  value,  for  at  every  point 
the  companies  have  been  given  the  benefit  of  the  doubt.  The  de- 
preciation since  time  of  construction  has  been  estimated  at  a  very 
low  figure.  The  stock,  bonds,  accounts  receivable,  etc.,  have  been 
estimated  at  their  face  value,  although,  in  many  instances,  their 
real  value  is  almost  nothing,  for  they  produce  little  income  and  are 
secured  by  property  of  little  value.  Further,  the  value  of  the  fran- 
chises to  the  city  is  much  greater  than  $75,000,000,  for  the  market 
value  of  the  stocks  is  undoubtedly  influenced  by  the  probable  early 
termination  of  the  franchises.  If  perpetual  grants  were  given,  mar- 
ket values  would  go  up,  and  also  franchise  values,  as  a  result. 

Market  Value  a  Fair  Basis. 

The  above  method  of  computing  the  value  of  franchises  has  so 
often  been  criticised  that  it  may  not  be  out  of  place  briefly  to  state 
why  it  is  believed  to  be  fair  and  equitable,  and  why  it  has  been 
adopted  here. 

The  question,  What  is  the  value  of  street  railway  properties?  is 
precisely  analagous  to  the  question  which  confronts  the  assessor 
when  trying  to  value  real  estate,  or  the  business  man  when  at- 
tempting to  find  the  worth  of  any  piece  of  property.  Each  goes  to 
those  who  are  most  familiar  with  such  properties,  and  wisely  so. 
Then  why  should  we  not  go  to  the  Stock  Exchange,  where  securities 
are  dealt  in  by  those  most  competent  to  judge,  and  accept  the 
opinion  of  such  experts  as  shown  by  actual  sales? 

The  rejoinder  that  only  a  small  number  of  shares  are  sold  in  a 
brief  period,  and  that  if  all  the  stock  were  dumped  upon  the  market, 
prices  would  be  much  lower,  has  no  weight.  The  same  would  be 
true  of  everything.  If  all  the  corn  were  to  be  dumped  upon  the 
Board  of  Trade  at  once  prices  would  go  to  pieces.  But  that  does 
not  cause  the  dealer  to  conclude  that  the  "going  price"  is  too  high 
and  that  he  had  better  "sell  short."  Far  from  it;  instead,  he  will 
almost  invariably  assert  that  the  present  value  is  as  correctly  esti- 
mated by  the  market  quotations  as  it  is  possible  to  fix  it.  The  small 
amount  of  stock  sold  at  current  prices  indicates  that  the  holders  con- 
sider it  worth  more  than  is  bid,  rather  than  that  the  bids  are  too 
high. 


18  MUNICIPAL    AFFAIRS. 

Corporation  lawyers  sometimes  plead  that  taking  the  market 
value  capitalizes  good  will,  skill  and  ability.  The  same  excuse 
might  be  offered  by  the  old  settler  who,  believing  real  estate  in  a 
certain  locality  will  increase  in  price,  secures  all  of  it  he  can;  and 
when  his  predictions  are  justified,  argues  that  his  land  ought  not  be 
assessed  at  its  present  value,  for  by  so  doing  a  burden  is  imposed 
upon  his  foresight  and  skill.  Again,  it  would  be  equally  true  that 
where  poor  management  is  shown,  lack  of  ability  has  influenced 
market  values,  and  that  they  are  lower  than  they  should  be  and 
would  be  ordinarily.  It  does  not  seem  that  such  an  unusual  amount 
of  skill  and  foresight  has  been  used  in  the  management  of  the  Chi- 
cago companies  as  to  call  for  reduction  in  the  market  values  to 
bring  the  quotations  down  to  the  normal  level,  or  to  such  as  the 
average  railway  manager  would  produce.  If  I  am  not  mistaken,  it 
would  be  easily  possible  to  secure  a  considerable  number  of  men, 
any  one  of  whom  could  manage  the  street  railways  of  Chicago  as 
efficiently  as  they  have  been  managed.  It  is  only  when  a  brilliant 
manager  gives  to  the  securities  a  higher  value  than  they  would 
have  under  the  average  manager  that  a  reduction  from  the  market 
price  ought  to  be  made.  This  is  certainly  not  the  condition  of  af- 
fairs in  Chicago  at  present. 

Meaning  of  "Original  Cost/' 

The  methods  of  valuing  the  assets  will  also  withstand  criticism, 
and  to  make  perfectly  clear  what  is  fact  and  what  is  estimate,  two 
sets  of  figures  have  been  given:  (i)  original  cost;  (2)  estimated 
present  value,  allowance  having  been  made  for  depreciation. 

In  working  out  the  figures  for  "original  cost  value  of  assets," 
Mr.  Bard  first  obtained  an  exact  and  complete  inventory  of  all 
property,  not  including  the  franchise,  but  mileage  and  kind  of  track, 
equipment,  rolling  stock,  real  estate,  buildings,  supplies,  stocks 
and  bonds  owned,  accounts  receivable,  etc.  He  then  proceeded  to 
ascertain  from  the  books  the  "original  cost"  of  these  various  items, 
viz.,  the  cost  when  originally  purchased. 

This  amount  is  obviously  not  what  the  property  would  bring  at 
public  or  private  sale,  for  most  of  the  items  have  depreciated,  and 
one — land — may  have,  probably  has  in  every  case,  appreciated. 
And  if  there  are  stocks  and  bonds,  it  is  very  seldom  that  their  face 
value  is  their  market  value.  It  should  be  emphasized,  however, 


CHICAGO   STREET   RAILWAYS.  19 

that  the  amount  above  given  as  the  original  cost  is  more  than  fair 
to  the  companies,  for  all  in  all  the  depreciation  is  considerably 
greater  than  the  increase  in  values.  The  market  value  is  much  less 
than  the  "original  cost"  value.  If,  when  the  franchises  expire,  the 
city  should  pay  the  "original  cost"  value  as  above  computed,  the 
companies  would  be  very  generously  treated,  even  more  generously 
than  they  in  justice  can  expect.  This  is  especially  true  in  view  of  the 
fact  that  the  companies  have  always  paid  large  dividends. 

How  to  Obtain  Present  Value. 

In  order  to  obtain  the  present  value  of  the  franchises,  it  is 
necessary,  therefore,  to  estimate  the  extent  to  which  the  various 
properties  have  depreciated.  Now  depreciation  arises  principally 
from  two  sources:  (i)  Wear  due  to  use,  (2)  introduction  of  new 
inventions  which  make  necessary  the  renewal  of  machinery  and 
plant  before  they  are  worn  out. 

Depreciation  due  to  wear  may  be,  and  often  is,  provided  for  by 
charges  for  "repairs  and  maintenance"  paid  out  of  earnings.  To 
capitalize  such  expenses,  either  directly  by  charging  them  to  "con- 
struction account,"  or  indirectly,  by  failing  to  keep  the  system  in 
good  condition,  depending  upon  stock  or  bond  issues  to  replace 
worn-out  plant,  is  bad  financiering.  Wages  might  be  capitalized 
with  equal  propriety.  The  proper  way  is  to  keep  the  plant  and 
equipment  fully  repaired,  and  to  pay  the  expense  out  of  earnings. 
When  this  is  done,  no  depreciation  is  chargeable  for  wear.1 

The  kind  of  depreciation  which  is  most  generally  disregarded 
is  that  due  to  the  substitution  of  new  inventions  for  old  and  less  de- 
sirable processes.  For  example,  the  old  horse  railroads  were  still 
capable  of  giving  fairly  good  service,  as  horse  roads  go,  when  con- 
verted into  cable  or  electric  traction;  but  it  was  impossible  longer 
to  continue  animal  power.  The  conversion  involved  considerable 
loss — a  loss  almost  equivalent  to  the  original  cost  of  the  road,  as- 
suming that  the  road  was  in  good  repair.  Now  this  depreciation 
should  have  been  guarded  against  and  a  fund  created  (equal  to  the 
cost  of  the  old  track  and  equipment)  so  that  part  of  the  expense  of 
constructing  the  new  road  would  have  been  paid  without  issuing 

*It  may  be  urged  that  it  is  impossible  to  keep  a  road  in  as  good  condition 
as  in  the  beginning.  Quite  true.  But  it  is  possible  to  produce  the  same  result 
by  accumulating  a  sinking  fund  or  depreciation  account  from  payments  from 
earnings. 


20  MUNICIPAL    AFFAIRS. 

new  stock  or  bonds,  or  the  old  stock  and  bonds  retired.  The 
amount  of  this  fund  should  always  equal,  as  nearly  as  possible,  the 
value  of  the  plant  and  equipment  displaced.  In  other  words,  the 
capital  stock,  bonds  and  other  liabilities,  less  sinking  funds,  reserve 
funds,  depreciation  funds,  etc.,  should  always  be  equivalent  to  the 
market  value  of  the  properties,  excluding  the  franchise.  Of  course, 
it  is  impossible  to  keep  them  exactly  equal,  as  no  one  can  forecast 
just  when  new  inventions  will  revolutionize  existing  systems,  but 
there  should  always  be  some  near  approximation.  And  the  amount 
placed  each  year  to  the  credit  of  a  depreciation  account  should  be 
paid  from  earnings,  just  as  much  as  expenditures  for  coal  or  oil. 

Depreciation  Not  Written  Off  fay  Companies. 

With  these  rules  as  a  standard,  let  us  examine  the  operations  of 
the  companies  to  see  how  far  the  principles  have  been  applied. 

Comparing  the  face  value  of  the  liabilities  outstanding  upon 
July  I,  1901 — amounting  to  $117,814,289.73 — with  the  "original 
cost  value  of  the  assets,"  placed  at  $56,013,500.48,  there  is  an  ex- 
cess of  $61,800,789.25.  This  shows  that  even  allowing  for  no  depre- 
ciation since  the  present  plants  were  constructed,  there  are  nearly 
$62,000,000  which  should  have  been  written  off  long  ago.  Taking 
the  estimated  present  market  value  of  the  assets — $45,841,488.76 — 
a  very  conservative  estimate,  the  depreciation  which  has  not  been 
provided  for  amounts  to  $71,972,800.97  at  least.1  In  other  words, 
there  is  "water"  to  the  amount  of  $72,000,000  in  the  liabilities  of 
the  companies. 

When  the  operations  of  the  companies  are  examined  in  detail, 
which  will  be  done  immediately,  one  will  see  how  this  result  was 
brought  about.  Expenditures  for  repairs  and  maintenance  have 
been  paid  out  of  earnings,  but  these  have  seldom,  if  ever,  been  of 
sufficient  amount  to  keep  the  plant  in  as  good  condition  as  when 
built.  Further,  no  depreciation  fund  has  been  accumulated  to  write 
off  old  capital  when  the  new  plant  was  purchased;  but,  instead, 
stocks  and  bonds  have  been  issued  to  provide  the  new  funds,  and 

*It  may  be  well  again  to  call  attention  to  the  fact  that  this  sum  does  not 
represent  the  estimated  value  of  the  plant  and  equipment  of  the  street  railroads 
el&ne,  but  includes  securities  held  by  a  few  of  the  companies,  cash  on  hand,  bills 
receivable,  etc.  Further,  the  total  depreciation  upon  plant,  not  including  real 
estate,  would  be  much  greater,  for  from  the  depreciation  of  the  plant  one  has  to 
subtract  the  appreciation  of  land  to  get  at  the  net  depreciation  of  the  assets. 


CHICAGO    STREET    RAILWAYS.  21 

the  old  stocks  and  bonds,  incurred  for  worn-out  and  antiquated 
plant,  have  been  retained  as  part  of  the  liabilities.  Thus  the  present 
systems  are  made  to  earn  dividends  not  only  upon  existing1  capital, 
but  upon  the  "original  cost"  of  scrap  iron  and  refuse.  In  a  few 
instances  stock  and  bond  dividends  have  been  declared  without  any 
attempt  to  cover  up  the  watering  process. 

Ordinarily  in  business  such  a  process  would  be  disastrous,  re- 
tarding progress  and  ending  in  bankruptcy,  but  in  the  case  of 
municipal  monopolies  it  is  different.  The  street  railway  business 
is  not  a  competitive  business.  Competition  has  been  eliminated 
in  Chicago  between  the  surface  lines.  Franchises  are  very  valuable, 
and  the  watering  of  stock  by  failing  to  write  off  depreciation  has 
been  counterbalanced  by  the  increasing  value  of  the  franchises,  so 
that  the  companies  pay  interest  upon  bonds  and  still  make  a  rea- 
sonable profit  upon  the  stock,  which  really  includes  at  least  $72,000,- 
ooo  of  water.  It  is  interesting  to  note  that  this  amount  of  water  is 
almost  equal  to  the  value  of  the  franchises  as  estimated  above, 
which  shows  that  the  companies  have  virtually  capitalized  the 
franchises. 

From  one  point  of  view,  it  matters  little  whether  liabilities 
are  $50,000,000  or  $500,000,000.  What  do  the  stockholders  care 
whether  they  get  10  per  cent,  on  $50,000,000  or  I  per  cent,  on  $500,- 
000,000.  The  net  profit  is  $5,000,000  in  each  case.  But  there  are 
serious  objections  to  stock  watering.  In  the  first  place,  there  will 
come  a  time  when  readjustment  is  necessary,  when  the  water  must 
be  squeezed  out.  This  is  apt  to  discredit  a  company  and  make  in- 
vestors suspicious  of  its  securities.  In  the  second  place,  the  adop- 
tion of  new  processes  is  retarded,  because  the  capital  nominally 
invested  is  already  so  large  as  to  make  the  negotiation  of  new  issues 
difficult.  In  the  third  place,  it  throws  dust  in  the  eyes  of  the  public, 
for  they  do  not  know  how  much  capital  is  actually  invested,  and  are 
inclined  to  assume  that  the  securities  represent  the  true  amount. 
Thus  companies  paying  5  per  cent,  are  often  left  to  themselves,  and 
others  paying  20  per  cent,  are  discussed  and  investigated,  when,  as 
an  actual  fact,  the  former  are  paying  the  larger  rate  of  profit  upon 
the  true  amount  of  capital  invested.  This  is  a  principal  reason  why 
companies  operating  franchises  have  almost  invariably  so  increased 
their  capital  stock  as  to  bring  the  dividends  down  to  the  average 


22  MUNICIPAL    AFFAIRS. 

rate  in  other  lines  of  business.1  Then,  in  the  fourth  place,  if  the 
securities  greatly  exceed  the  value  of  the  plant,  the  company  is  in 
a  position  to  compromise,  to  give  the  city  something,  without  in 
reality  relinquishing  much.  And  if  dividends  are  near  the  going 
rate  in  other  lines,  the  cry  "confiscation"  may  be  raised  whenever 
the  public  attempts  to  make  the  company  give  compensation  for 
franchise  rights. 

Rate  of  Profit, 

Having  found  the  value  of  the  plant  and  the  amount  of  water 
in  the  securities,  we  are  now  able  to  compute  the  rate  of  profit  upon 
the  amount  of  capital  actually  invested. 

The  gross  earnings  of  the  Chicago  Union  Traction  Co. — the 
lessee  of  the  five  roads  upon  the  North  and  West  sides — for  the 
year  ending  June  30,  1901,  were  $7,289,139.  Other  receipts,  ex- 
clusive of  the  income  from  stocks  of  other  street  railway  corpora- 
tions in  Chicago,  amounted  to  $107,355,  making  a  total  of  $7,396,- 
494.  The  expenses  amounted  to  $4,335,155,  leaving  a  profit  of  $3,- 
061,339.  The  Chicago  City  Railway  Co.  received,  during  1900, 
$5,543,180,  expended  $3,655,002,  and  had  a  profit  of  $1,888,178. 
The  total  gross  earnings  of  both  companies  were,  therefore,  $12,- 
939,674,  and  the  profits  $4,949,517. 

What  now  is  the  capital  value  upon  which  to  compute  the  rate 
of  profit?  In  the  preceding  pages,  the  "original  cost  value  of  the 
assets"  was  found  to  be  $56,013,500.48,  and  the  estimated  present 
value  $45,841,488.76.  But  neither  amount  is  the  capital  which  is 
producing  the  profit  of  $4,949,517.  Four  of  the  companies  include 
among  their  assets  stocks  and  bonds  of  other  companies,  accounts 
and  bills  receivable,  inter-company  obligations,  deposits,  etc.,  which 
produce  very  little  income  and  have  little  value.  These  items  aggre- 
gate some  $22,000,000,  which,  subtracted  from  the  "original  cost 

value,"  would  give  the  following: 

Cost  Estimated  market 

value  of  plant  value  of  plant 

Companies.                                                alone,  July  I,  1901.  alone,  July  i,  1901. 

Chicago   City   Railway    Co $12,415,604.37  $9,800,000 

Chicago  Union  Traction  Co 927,895.00  900,000 

North  Chicago  City  Railway  Co 4,616,909.47  2,300,000 

1In  1897  at  the  annual  meeting  of  the  stockholders  Mr.  Yerkes  suggested  the 
reduction  of  dividends  on  the  North  Chicago  Street  Railroad  capital  stock  as  a 
matter  of  policy  to  one-half  the  rate  of  12  per  cent,  per  annum  then  paid  by 
the  simple  expedient  of  "doubling  the  stock." 


CHICAGO    STREET    RAILWAYS.  23 

North  Chicago  Street  Railroad  Co 1,805,388.65  .      1,400,000 

Chicago  Passenger   Railway  Co 1,677,411.29  i      1,300,000 

Chicago  West  Division  Railway  Co 5,783,713.65                         4,000,000 

West  Chicago  Street  Railroad  Co 6,383,147.34                        4,900,000 

Total    $33,610,069.77  $24,600,000 

Eliminating  the  small  income  which  these  stocks,  bonds,  etc., 
produced — $30,266 — from  the  gross  income  as  given  above,  the  net 
income  is  $4,919,251.  This  is  a  profit  of  14.6  per  cent,  upon  the 
original  cost  value  of  the  plant  or  of  the  productive  assets,  or  20 
per  cent,  upon  the  estimated  present  market  value  of  the  plant  or 
of  the  productive  assets. 

Upon  a  capitalization  of  $33,600,000,  it  follows  that  the  com- 
panies could  pay  the  city  12  per  cent,  of  gross  income,  lay  aside  4 
per  cent,  for  depreciation  in  excess  of  the  ordinary  charges  for  re- 
pairs and  maintenance,  and  still  pay  6  per  cent,  dividends.  Upon  a 
capitalization  of  $24,600,000,  which  still  is  probably  in  excess  of 
the  market  value  of  the  plant,  the  companies  could  pay  the  city 
almost  20  per  cent,  of  gross  income,  lay  aside  a  depreciation  fund 
of  4  per  cent,  and  pay  6  per  cent,  dividends.  Or,  upon  a  capitaliza- 
tion of  $24,600,000,  the  companies  could  lower  fares  to  4  cents  and 
still  accumulate  a  depreciation  fund  of  4  per  cent,  a  year  and  pay 
dividends  amounting  to  6  per  cent.  This  computation  is  upon  the 
basis  of  present  traffic,  but  if  fares  were  lowered  to  4  cents,  the 
traffic  would  increase  considerably,  and  thus  enable  the  companies 
either  to  still  further  lower  fares  or  pay  larger  dividends. 
Present  Compensation  for  Franchises. 

Either  one  of  these  alternatives  could  be  adopted  if  the  capitali- 
zation approximated  the  market  value  of  the  plant,  and  this  also  in 

addition  to  the  following  payments  made  to  the  city  in  I90O.1 

Car  licenses $61,440.24 

Personal  property  tax 210,955.36 

Maintenance  of  bridges 3,000.00 

Percentage  of  receipts 1,647.56 

Mileage  compensation 81 1.67 

Extensions  of  electric  light 30,000.00 

Maintenance  of  electric  lighting 10,000.00 

$317,854-83 

*Real  estate  taxes  are  excluded  because  this  property  is  assessed  by  the  local 
town  assessors  and  there  are  no  statistics  to  show  what  is  the  total  amount.  If 
given,  it  could  not  be  construed  as  compensation  for  franchises,  as  its  value  is 
determined  irrespective  of  franchise  rights. 

These  figures  have  been  furnished  by  the  City  Controller's  office,  to  which 
I  am  greatly  indebted. 


24  MUNICIPAL    AFFAIRS. 

In  addition  the  companies  are  required  to  pave  a  portion  of  the 
streets,  but  there  is  no  record  of  the  amount  actually  expended. 

These  payments  are  in  a  sense  compensation  for  the  franchises 
granted ;  and  if  there  were  no  such  payments  to  be  made,  the  market 
values  of  the  securities  would  be  more  than  at  present.  But  as  they 
were  paid  out  of  gross  earnings  before  market  values  were  fixed,  the 
city  evidently  receives  nothing  for  $75,000,000  in  franchises  now  be- 
ing operated  by  the  street  railway  companies.  In  other  words,  pri- 
vate corporations  are  using  $75,000,000  of  capital  for  which  they 
pay  not  one  cent  of  compensation.  Evidently  some  readjustment 
of  conditions  is  greatly  needed. 

Let  us  now  examine  each  of  the  seven  companies  somewhat  in 
detail. 

History  of  the  Chicago  City  Railway  Co.  * 

Street  railways  were  first  operated  in  Chicago  in  1859 — about 
the  same  time  that  they  were  introduced  in  other  cities — and  im- 
mediately checked  the  growing  business  of  the  omnibus  lines. 
Upon  February  14,  1859,  a  special  act  of  the  legislature  incorpor- 
ated two  companies,  namely,  the  Chicago  City  Railway  Co.  and  the 
North  Chicago  City  Railway  Co.  The  former  took  over  franchises 
previously  granted  to  private  persons,  and  soon  had  constructed 
lines  in  the  south  and  west  divisions  of  the  city.  The  latter  were 
sold  to  the  West  Division  Railway  Co.  in  1863,  and  since  that  time 
the  Chicago  City  Railway  Co.  has  confined  its  operations  to  the 
South  Side — that  portion  of  the  city  south  and  east  of  the  Chicago 
River. 

Horse  traction  was  almost  universal  until  1881,  only  three 
miles  out  of  the  forty-five  being  operated  by  steam  upon  January 
1st  of  that  year.  Cable  power  was  introduced  the  year  following 
and  in  a  few  years  a  large  proportion  of  the  road  had  been  con- 
verted. It  is  advisable,  therefore,  to  strike  a  balance  at  the  close  of 
1880  and  ascertain  what  had  been  the  financial  results  up  to  that 
date. 

Upon  December  31,  1880,  there  were  45.679  miles  of  horse  rail- 
road (the  figures  for  mileage  are  always  given  in  this  study  in 
terms  of  single  track — I  mile  double  track  being  equivalent  to  2 
miles  single  track);  $1,319,062.91  had  been  paid  out  for  "Construe- 


CHICAGO   STREET   RAILWAYS.  25 

tion,"  namely,  roadbed,  track  and  street  paving,  or  $28,854.89  per 
mile.  Nothing  had  been  credited  to  this  account  for  depreciation, 
and  this  amount  represented  not  only  original  cost,  but  changes  and 
reconstruction  as  well.  From  the  data  given  in  the  books  of  the 
company,  showing  the  cost  of  part  of  the  road  and  of  the  paving, 
Mr.  Bard  has  estimated  (and  his  figures  seem  to  be  over,  rather 
than  under,  the  actual  cost)  that  the  original  cost  of  the  roadbed 
existing  on  December  31,  1880,  was  $772,596.08,  or  $16,913.59  per 
mile.  (See  Exhibit  I,  Sec.  i.) 

The  total  assets  and  liabilities  of  the  company  upon  that  date 
were  (Exhibit  I,  Sec.  i) : 

ASSETS. 

Roadbed    $772,596.08 

Real   estate 234,423.63 

Buildings    202,472.75 

Personal    property 473,442.29 

Bills   receivable 2,606.00 

Cash    3»976.4i     $1,689,517.16 

LIABILITIES. 

Capital    stock $1,500,000.00 

Bills  and  accounts  payable 152,093.67 

Drivers'    deposits 16,977.90       1,669,071.57 

Surplus  December  31,  1880 $20,445.59 

According  to  the  books  the  surplus  was  $676,092.43,  but  no 
allowance  had  been  made  for  depreciation,  which  represents  the 
difference  between  the  two  figures. 

Since  1881  the  conversion  to  cable  and  electric  traction  has  con- 
tinued, until  at  present  only  5  out  of  the  182  miles  owned  and  oper- 
ated by  the  Chicago  City  Railway  Co.  are  horse  road,  35  miles  are 
cable  and  142  miles  electric.  (See  Exhibit  I,  Sec.  8.) 

The  total  cost  value  of  all  property  existing  December  31,  1897, 
and  the  outstanding  obligations  are  as  follows  (See  Exhibit  I, 
Sect.  6) : 

ASSETS. 

Cable    road $2,606,280.24 

Electric   road 3,142,425.17 

Horse  road 105,741.43 

Leased   road 170,000.00 

Illinois   Cenral   Railroad  construction 60,590.92         $6,085,037.76 

Rolling    stock 1,521,931.60 

Real   estate 1,993,362.50 


26  MUNICIPAL    AFFAIRS. 

Machinery  1,208,853.21 

Miscellaneous   property 225,919.30 

Stock,  bonds,  accounts  receivable 28,768.20 

Cash  on  hand 540,088.14 

Total    $11,603,96071 

LIABILITIES. 

Capital    stock $12,000,000.00 

Bonds    4,619,500.00 

Accounts    payable 232,488.22       $16,851,988.22 

DEFICIT   $5,248,027.51 

Since  December  31,  1897,  only  a  few  changes  have  been  made 
in  the  debit  and  credit  sides  of  the  ledger,  and  the  conditions  upon 
July  i,  1901,  can  be  stated  with  very  close  approximation.  During 
1899  and  1900  $1,500,000  in  stock  were  added  to  the  liabilities,  and 
upon  July  i,  1901,  $4,500,000  more  were  issued,  making  the  total 
capital  stock  $18,000,000.  The  proceeds  of  the  last  issue,  together 
with  $119,500  from  the  treasury,  went  to  retire  the  bonds  then  due. 
Assuming  that  the  remainder  produced  by  these  stock  sales — 
$1,380,500 — was  spent  in  increasing  the  value  of  the  assets  (an  as- 
sumption perfectly  fair  to  the  company),  we  have  for  the  original 
cost  value  of  the  assets  upon  July  i,  1901,  $12,984,460.71,  and  for 
the  liabilities  $18,232,488.22.  This  would  leave  an  excess  of  liabil- 
ities over  assets — a  deficit — of  $5,248,027.51.* 

This  is  the  sum  which  is  properly  chargeable  to  depreciation 
and  which  should  have  gradually  been  written  off  by  the  company. 
If  account  be  taken  of  depreciation  since  construction  (for  the  road- 
bed is  not  as  good  as  when  built  and  cable  traction  is  going  out  of 
use  and  other  systems  must  be  adopted  before  long),  the  deprecia- 
tion would  be  considerably  increased.  The  original  cost  of  the 
present  assets  was  nearly  $13,000,000,  but  they  could  not  be  sold 
for  more  than  $9,800,000  at  the  very  most,  and  probably  for  not 
more  than  $8,500,000.  Adopting  the  maximum  figure,  the  deficit 
would  be  over  $8,400,000.  In  other  words,  the  market  value  of  the 
assets  is  sufficient  to  pay  about  $9,800,000  to  the  stockholders,  who 
nominally  should  receive  $18,000,000.  Of  course  the  franchises 
are  further  security,  and  if  they  should  not  be  terminated  for  four 

'Of  course  the  minor  items  have  changed  since  December  31,  1897,  but  the  re- 
ports of  the  company  do  not  show  to  what  extent,  and  as  they  would  not  affect  the 
figures  materially,  I  have  taken  them  as  in  1897. 


CHICAGO    STREET    RAILWAYS.  27 

or  five  years  the  profits  of  the  company  would  be  sufficient  to  pay 
dollar  for  dollar,  if  devoted  exclusively  to  wiping  out  the  deficit — 
or  writing  off  the  depreciation. 

The  history  of  the  stock  and  bond  issue  shows  how  very  re- 
munerative the  street  railway  industry  upon  the  South  Side  has 
been.  In  1881  the  capital  stock  was  $1,500,000,  which  has  grad- 
ually been  increased  to  $18,000,000.  All  of  this  stock,  except  pos- 
sibly $250,000,  which  was  issued  as  dividends,  has  been  sold  to 
stockholders  at  par.  Without  exception,  it  could  have  been  sold  at 
a  premium  immediately  after  issue,  which  means  that  a  large  bonus 
has  been  given  to  the  stockholders  each  time.  Including  the  regu- 
lar annual  dividends  of  10  per  cent,  in  1882  and  12  per  cent,  each 
year  since,  the  extra  dividends  in  stock,  bonds  and  cash,  and  the 
premiums  upon  the  stock  and  bond  issues,  we  have  total  dividends 
of  $37,602,187.50  paid  between  January  i,  1882,  and  January  I, 
1898,  or  an  average  of  44.63  per  cent,  per  annum  for  sixteen  years. 
(Exhibit  I,  Sec.  7.)  Since  January  i,  1898,  $6,000,000  in  stock 
has  been  issued  at  par,  $1,000,000  in  July,  1899,  $500,000  in  August, 
1900,  and  $4,500,000  July  i,  1901.  The  market  price  of  the  stock 
after  the  first  issue  was  277,  after  the  second  242,  and  after  the  third 
209.  The  bonus  upon  the  1899  issue  was,  therefore,  $1,770,000; 
upon  the  1900  issue,  $710,000,  and  upon  the  1901  issue,  $4,905,000. 
The  percentages  for  the  respective  years,  upon  the  basis  of  stock 
outstanding  when  sales  were  made,  were  14  3-4,  5  6-13  and  36  1-3 
respectively.  Adding  the  regular  quarterly  dividends  for  these 
years — 12  per  cent,  per  annum — the  total  dividends  would  be  26  3-4 
per  cent.,  17  6-13  per  cent,  and  48  1-3  per  cent.,  respectively,  an 
average  of  nearly  31  per  cent,  for  the  last  three  years. 

It  is  to  be  remembered,  however,  that  the  stock  contains  at  least 
$8,400,000  of  water ;  the  present  value  of  the  productive  assets — the 
real  capital — being  not  more  than  $9,800,000.  The  net  earnings 
for  1900  were  $r,888,ooo,  which,  upon  a  capitalization  of  $9,800,000, 
would  yield  dividends  of  over  19.2  per  cent.  Thus,  the  Chicago 
City  Railway  Co.  could  give  the  city  20  per  cent,  of  its  gross  earn- 
ings and  still  pay  8  per  cent,  dividends  upon  the  actual  capital  in- 
vested. Or,  it  could  pay  the  city  16  per  cent,  of  gross  earnings,  lay 
aside  4  per  cent,  for  depreciation  and  still  pay  6  per  cent,  dividends. 
Or,  it  could  reduce  fares  to  4  cents  on  the  basis  of  the  present  traffic 


28  MUNICIPAL    AFFAIRS. 

and  still  pay  8  per  cent,  dividends  upon  the  actual  capital  invested. 
Or,  it  could  sell  6  tickets  for  25  cents  and  lay  aside  4  per  cent,  for 
depreciation  and  6  per  cent,  for  dividends.  The  increase  in  traffic 
which  would  follow  this  reduction  of  fares  would  probably  render  a 
still  further  reduction  possible. 

North  Side— North  Chicago  City  Railway  Co. 

The  first  company  to  operate  a  street  railroad  upon  the  North 
Side — the  North  Chicago  City  Railway  Co. — was  incorporated  Feb- 
ruary 14,  1859,  as  seen  above.  The  great  fire  of  1871  practically 
destroyed  all  of  its  property,  but  reconstruction  was  at  once  begun, 
and  by  May  24,  1886,  there  were  in  operation  44.774  miles  of  track 
— horse  traction;  $2,054,277.65  had  been  expended  for  construc- 
tion, real  estate,  buildings,  rolling  stock,  etc.  Yet  the  capital  stock 
was  only  $500,000.  Of  the  bonds  outstanding — $1,247,000 — at 
least  $750,000  had  been  issued  to  stockholders  as  dividends ;  and  of 
the  remaining  $497,000  a  considerable  portion  had  probably  been 
issued  in  a  similar  way.  Thus,  even  assuming  that  the  stock  had 
fully  been  paid  in,  it  is  evident  that  the  road  had  been  built  princi- 
pally out  of  profits.  (Exhibit  II,  Sec.  2.) 

The  original  cost  value  of  the  plant  upon  May  24,  1886,  ex- 
clusive of  the  franchise,  is  shown  by  the  trial  balance  to  be  (Ex- 
hibit II,  Sec.  2) : 

1.  Real    estate $245,188.37 

2.  Personal  property,  inventoried  at 482,739.66 

3.  Buildings    418,024.84 

4.  Construction    908,324.78 

Total    $2,054,277.65 

Allowing  for  appreciation  and  depreciation,  the  plant  was  not 
worth  more  than  $1,500,000  and  perhaps  could  not  have  been  sold 
for  more  than  $1,250,000.  The  market  value  of  the  stock  was 
about  $500  per  share  and  the  franchises  were  worth  at  least  $2,100,- 
ooo,  and  probably  nearer  $2,500,000. 

Such  was  the  financial  condition  of  the  North  Chicago  City 
Railway  Co.  upon  May  24,  1886,  when  an  agreement  was  entered 
into  with  the  North  Chicago  Street  Railroad  Co.,  which  had  been 
incorporated  six  days  previous,  and  which  was  controlled  by  Messrs, 


CHICAGO   STREET   RAILWAYS.  29 

Yerkes,  Widener,  Elkins  and  their  associates.1  In  brief,  this  con- 
tract provided  for  the  leasing  of  the  property  and  franchises  owned 
by  the  North  Chicago  City  Railway  Co.  for  a  term  of  999  years,  in 
return  for  which  the  North  Chicago  Street  Railroad  Co.  agreed  to 
pay  the  interest  on  all  bonds  and  mortgages  of  the  lessor  outstand- 
ing and  to  be  created,  and  a  quarterly  payment  of  $37,500.  The 
lessee  further  agreed  to  construct  a  cable  road  on  North  Clark 
street,  the  actual  cost  of  which  was  to  be  borne  by  the  lessor,  pay- 
ment being  secured  by  a  mortgage  bearing  interest  at  6  per  cent, 
per  annum,  payable  semi-annually.  Additional  lines  and  improve- 
ments were  to  be  constructed  as  mutually  agreed,  to  be  paid  for  as 
above  or  by  bonds  secured  by  a  mortgage,  at  the  option  of  the 
lessee.  A  concluding  clause  provided  that  when  the  North  Clark 
Street  cable  road  should  be  completed,  the  lessee  should  pay  to  the 
lessor  company  $500,000  in  cash  or  in  capital  stock  at  the  option  of 
the  former  company — a  sum  just  equivalent  to  the  capital  stock  of 
the  North  Chicago  City  Railway  Co.  (Exhibit  II,  Sec.  I.) 

These  terms  were  apparently  very  favorable  to  the  old  company, 
as  the  quarterly  payments  were  equivalent  to  a  30  per  cent,  annual 
dividend,  payable  quarterly,  upon  the  total  capital  stock.  Doubt- 
less the  company  also  considered  the  $500,000  bonus  as  an  addi- 
tional compensation  equivalent  at  least  to  6  per  cent,  annual  divi- 
dend, and  in  case  the  North  Chicago  Street  Railroad  Co.  should  be 
prosperous,  equivalent  to  a  10  or  12  per  cent,  annual  dividend,  or 
more,  making  a  total  of  40  per  cent,  or  more  upon  the  actual  capi- 
tal stock  of  the  old  company. 

Comparing  the  cash  quarterly  payments,  the  interest  on  the 
bonds  and  the  bonus  with  the  probable  market  value  of  the  plant, 
one  finds  the  price  paid  equivalent  to  at  least  16  per  cent.,  and  pos- 
sibly 18  per  cent.,  on  the  maximum  estimate  of  $1,500,000,  or  i&J 
per  cent.,  and  possibly  21  per  cent.,  upon  $1,250,000.  This  was  a 
very  liberal  sum,  but  probably  not  more  than  the  value  of  the  fran- 
chises warranted. 

One  wonders  at  first  glance  why  the  old  company  should  desire 
to  lease  its  property  even  upon  such  favorable  terms  when  it  was 

"Care  must  be  taken  to  distinguish  between  the  North  Chicago  City  Railway 
Co.  (N.  C.  C.  R.  Co.)  and  the  lessee  company,  the  North  Chciago  Street  Railroad 
Company  (N.  C.  S.  R.  R.  Co.). 


30  MUNICIPAL    AFFAIRS. 

in  such  good  financial  condition,  and  why  the  new  company  should 
be  willing  to  pay  such  a  high  price  for  the  properties  even  though 
it  were  not  more  than  the  market  would  warrant.  The  preamble 
to  the  agreement  furnishes  only  a  partial  explanation.  It  states 
that  the  old  company  considered  a  change  in  the  motive  power 
wise  and  necessary.  But  apparently  it  did  not  have  the  courage 
to  make  the  experiment.  This  the  new  company  was  willing  to  do, 
and  upon  terms  that  appeared  to  be  very  favorable  to  the  old  com- 
pany. The  operations  of  the  lessee  under  the  agreement  will  show 
how  it  evaded  the  strict  letter  of  the  contract  and  how  it  burdened 
the  minority  stockholders  with  a  very  large  debt.  Possibly  the 
North  Chicago  Street  Railroad  Co.  had  prearranged  this  course 
of  action. 

On  May  24,  1886  (the  date  of  the  agreement  between  the  two 
companies),  the  lessee — the  North  Chicago  Street  Railroad  Co. — 
made  a  contract  with  the  United  States  Construction  Co.  to  build 
the  North  Clark  street  cable  line.  Under  this  agreement,  which 
was  very  loosely  drawn,  and  other  agreements  made  in  1886  and 
1887,  the  United  States  Construction  Co.  completed  work  for  which 
it  received  $4,500,000  in  capital  stock  in  the  new  road,  $998,000  in 
4j  per  cent,  bonds  of  the  old  company  and  $710,908.39  in  cash  from 
the  new  road,  a  total  of  $6,208,908.39.  The  cost  to  the  Construc- 
tion Company,  according  to  the  very  liberal  estimates  of  Mr.  Bard, 
could  not  have  exceeded  $3,141,741.32.  (Exhibit  II,  Sees.  4  and  5.) 

Thus,  if  the  securities  were  selling  at  par  there  would  be  a  profit 
to  the  United  States  Construction  Co.  of  $3,067,167.07.  But  the 
amount  is  still  larger,  for  almost  immediately  the  stock  went  to  a 
premium,  and  since  1892  has  been  worth  over  $200  per  share. 

This  large  profit  was  charged  against  the  North  Chicago  City 
Railway  Co.  in  apparent  violation  of  the  contract  which  required 
the  North  Chicago  Street  Railroad  Co.  to  keep  an  exact  account 
of  the  cost  and  to  debit  the  lessor  that  amount  only.  It  may  be 
claimed  that  the  cost  was  $6,200,000,  as  that  was  the  sum  paid  the 
United  States  Construction  Co.  by  the  lessee.  But  the  contract 
was  merely  a  subterfuge,  as  the  United  States  Construction  Co. 
originally  owned  49,990  of  the  50,000  shares  of  the  capital  stock 
first  issued,  and  the  same  men  controlled  both  companies.  (Ex- 
hibit III,  Sec.  3.) 


CHICAGO   STREET    RAILWAYS.  31 

The  improvements  paid  for  by  the  North  Chicago  Street  Rail- 
road Co.,  without  the  intermediation  of  the  Construction  Company, 
amounted  to  $1,634,421.54,  to  which  should  be  added  $79,001.96  of 
floating  debt  assumed  by  the  lessee,  making  the  total  expenditures 
of  the  lessee  for  the  account  of  the  lessor  $7,922,331.89.  The 
lessor  company  has  paid  $1,750,000  in  bonds,  leaving  a  balance  still 
due  the  lessee  on  December  31,  1897,  of  $6,172,331.89.  (Exhibit 
II,  Sec.  s.) 

The  original  cost  value  of  the  assets  existing  December  31,  1897, 

were  as  follows : 

73.329  miles  single  track  road $3,184,280.14 

Real    estate 245,188.37 

Buildings 1,187,440.96 

Personal  property,  per  inventory 489,489.66 

Total    $S,io6,399.i3 

The  outstanding  liabilities  upon  the  same  date  were : 

Capital    Stock $500,000.00 

First  mortgage  6  per  cent,  bonds 500,000.00 

Consolidated  4^  per  cent,  mortgage  bonds 2,497,000.00 

Due  N.  Chi.  St.  R.  R.  Co.  for  expenditures  for  betterments 6,172,331.89 

Total    $9,669,331-89 

showing  an  excess  of  $4,562,932.76  over  the  original  cost  value  of 
existing  plant.  But  as  the  cost  value  is  only  $2,109,399.13  in  ex- 
cess of  the  outstanding  bonds,  which  are  a  first  lien  upon  the  prop- 
erty, there  remain  $4,062,932.76  of  the  claim  of  the  lessee  and 
nothing  but  the  franchise  to  secure  it  and  the  claims  of  the  stock- 
holders. (Exhibit  II,  Sec.  8.) 

Indeed,  the  company  is  in  a  much  worse  condition  than  these 
figures  indicate,  for  in  taking  the  cost  value  of  the  assets  at  $5,106,- 
399.13,  no  allowance  was  made  for  depreciation,  which  would  be  a 
very  considerable  sum  on  every  item  except  the  real  estate.  It  is 
very  much  doubted  whether  the  market  value  of  the  assets,  ex- 
clusive of  the  franchise,  is  sufficient  to  liquidate  the  outstanding 
bonds. 

North  Side— North  Chicago  Street  R.  R.  Co. 

The  financial  condition  of  the  North  Chicago  Street  Railroad 
Co.  is  considerably  better  than  that  of  the  road  just  treated.  Be- 
tween May  24,  1886,  and  December  31,  1897,  it  had  expended  on  its 
own  account  $6,874,589.08,  of  which  $4,255,388.35  represent  invest- 
ments in  stocks  and  bonds  of  other  companies,  accounts  and  bills 


32  MUNICIPAL    AFFAIRS. 

receivable  and  other  assets  which  are  not  used  directly  in  the  oper- 
ation of  the  road,  leaving  a  total  expenditure  for  plant  of  $2,619- 
200.73.  (Exhibit  III,  Sec.  4.)  The  cost  value  of  the  plant  as  it 
existed  on  December  31,  1897  (excluding  again  the  stocks,  bonds, 
etc.),  was  $1,805,388.65,  showing  a  depreciation  of  $813,812.08. 
(Exhibit  II,  Sec.  5.) 

The  original  cost  of  all  the  property  as  it  existed  December  31, 
1897,  was  $6,060,777,  to  which  should  be  added  $2,109,399.13 — the 
excess  of  the  estimated  original  cost  of  the  North  Chicago  City 
Raliway  Co.  properties  over  outstanding  obligations,  which  the 
North  Chicago  Street  Railroad  Co.  might  claim  as  a  part  payment 
of  the  amount  due  it,  making  the  total  assets  $8,170,176.13.  (Ex- 
hibit III,  Sec.  5.)  There  are  outstanding  liabilities  amounting  to 
$7,407,597.08,  leaving  $762,581.05.  This  book  value  and  the  value 
of  the  franchise  constitute  the  security  of  the  $6,600,000  of  capital 
stock.  Here  again  no  allowance  has  been  made  for  depreciation 
upon  existing  plant,  which  would  be  considerable,  and  if  allowed 
for,  would  cause  liabilities  to  exceed  assets  considerably.  (Exhibit 
III,  Sec.  6.) 

Notwithstanding  the  lack  of  real  property  as  security,  the  stocks 
of  the  two  companies  have  always  been  valuable.  From  1886  to 
December  31,  1892,  the  company  paid  dividends,  including  stock 
dividends  and  bonuses  as  well  as  regular  dividends,  averaging  6.86 
per  cent,  upon  the  capital  stock.  From  1893  to  1897  they  averaged 
25.24  per  cent,  per  year.  The  total  amount  of  extra  dividends  in 
the  shape  of  stocks  and  bonds  amounted  to  $3,548,000,  the  regular 
dividends  to  $5,764,253.50,  a  total  of  $9,312,253.50.  To  this 
amount  should  be  added  30  per  cent,  on  the  $249,900,  the  outstand- 
ing stock  of  the  North  Chicago  City  Railway  Co.,  or  a  total,  up  to 
December  31,  1897,  of  $822,670.  The  aggregate  profit  of  the 
stockholders  of  both  companies  was,  therefore,  $10,134,923.50  from 
May  24,  1886,  to  December  31,  1897 — not  a  very  bad  showing  for 
roads  whose  property,  exclusive  of  franchise  rights,  would  not  sell 
for  a  sufficient  amount  to  meet  outstanding  obligations.  (Exhibit 
III,  Sec.  7.) 

Since  1897  no  changes  have  been  made  in  the  assets  and  liabili- 
ties of  the  North  Side  lines.  In  1899  they  were  leased  to  the  Chi- 
cago Union  Traction  Co.,  but  this  will  be  treated  of  later. 


CHICAGO   STREET   RAILWAYS.  33 

To  complete  the  history  of  the  North  Side  roads  it  only  remains 
to  show  the  relations  of  the  North  Chicago  City  Railway  Co.,  the 
North  Ch'icago  Street  Railroad  Co.  and  the  United  States  Construc- 
tion Co.  A  majority  of  the  stock  of  the  first  company  (2,501 
shares)  was  purchased  by  the  North  Chicago  Street  Railroad  Co.  in 
1886.  This  company  in  turn  was  controlled  by  the  United  States 
Construction  Co.,  which  would  not  produce  its  books  for  exa  mina- 
tion;  but  if  current  report  and  financial  papers  are  to  be  believed, 
the  Construction  Company  was  controlled  by  Messrs.  Yerkes, 
Widener,  Elkins  and  their  associates.  Thus,  as  far  as  the  majority 
interest  of  the  lessor  is  concerned,  any  financial  deal  between  the 
two  companies  would  simply  be  taking  money  from  one  pocket  and 
putting  it  in  another.  But  not  so  as  to  the  minority  interest — the 
stockholders  who  did  not  also  hold  stock  in  the  United  States  Con- 
struction Co. ;  they  would  be  burdened  with  a  heavy  debt,  and  such 
was  possibly  the  purpose  of  the  lessee  or  its  backer,  the  United 
States  Construction  Co.  The  agreement  of  May  24,  1886,  was 
plain,  but  as  the  Construction  Company  virtually  controlled  the 
majority  of  stock  in  the  company  being  manipulated,  it  would  have 
been  difficult,  even  if  the  minority  stockholders  desired,  to  know 
what  was  going  on  and  to  remedy  it.  Indeed,  the  issuing  of  the 
stock  of  the  lessee  before  the  United  States  Construction  Co.  had 
a  title  to  it  in  order  that  the  latter  company  might  speculate  in  it 
before  it  was  paid  for,  is  characteristic  of  the  way  in  which  the 
North  Side  companies  have  been  manipulated  in  the  interest  of  a 
few  individuals. 

West  Side— Chicago  Passenger  Railway  Co. 

The  first  street  railway  built  upon  the  West  Side  was  constructed 
by  the  Chicago  City  Railway  Co.,  which  transferred  its  lines  to  the 
Chicago  West  Division  Railway  Co.  in  1863.  But  the  present  re- 
lations of  the  various  companies  can  most  easily  be  understood  if 
one  begins  with  the  fourth  company  organized,  viz.,  the  Chicago 
Passenger  Railway  Co.  This  company  was  incorporated  Febru- 
ary 12,  1883,  and  in  1888,  when  an  agreement  was  made  with  the 
West  Chicago  Street  Railroad  Co.,  it  owned  29.79  rniles  of  horse 
railroad.  Its  capital  stock  was  $1,000,000  (10,000  shares)  and  the 
outstanding  bonds  amounted  to  $400,000.  (Exhibit  IV,  Sec.  I.) 

The  first  agreement  between  the  Chicago  Passenger  Railway 


34  MUNICIPAL    AFFAIRS. 

Co.  and  the  West  Chicago  Street  Railroad  Co.,  under  date  of  No- 
vember 1 6,  1888,  stipulated,  among  other  things,  that  the  former 
should  convert  the  horse  road  into  a  cable  line  for  certain  specified 
distances  upon  Desplaines,  Washington  and  Franklin  streets.  The 
two  companies  were  to  use  this  line  jointly,  and  as  a  consideration 
the  lessee  was  to  pay  the  entire  cost  of  construction  and  5  per  cent, 
per  annum  of  the  amount  which  should  be  paid  by  the  Chicago 
Passenger  Railway  Co.  in  rebuilding  and  repaving  the  Washington 
street  tunnel.  The  same  company  was  also  to  provide  for  the  trac- 
tion of  the  cars  of  the  Chicago  Passenger  Railway  Co.  through  the 
tunnel  and  around  the  loop  into  the  central  portion  of  the  city ;  the 
amount  charged  therefor  to  be  a  reasonable  sum  as  later  agreed 
upon.  The  duration  of  the  contract  was  fifty  years.  (Exhibit  IV, 
Sec.  i.) 

This  agreement  was  not  satisfactory  and  upon  March  15,  1889, 
just  four  months  later,  it  was  so  amended  as  to  require  the  lessor 
to  issue  6  per  cent,  bonds  to  fund  its  floating  indebtedness,  to  pay 
for  improvements  contracted  for  (probably  referring  to  the  obliga- 
tions incurred  under  the  preceding  agreement),  and  to  pay  for  any 
construction  work  under  the  present  agreement,  except  the  cable 
road  provided  for  above.  All  of  these  bonds  were  to  be  guaranteed 
by  the  lessee,  which  thereafter  was  to  receive  the  gross  receipts 
and  to  pay  all  operating  expenses.  As  remuneration,  this  com- 
pany was  to  pay  the  lessor  $25,000  semi-annually,  being  5  per  cent, 
per  annum  on  the  outstanding  stock.  The  other  provisions  were  so 
modified  as  to  release  the  Chicago  Passenger  Railway  Co.  from 
paying  for  traction  of  its  cars  and  the  West  Chicago  Street  Rail- 
road Co.  from  paying  the  5  per  cent,  rental.  Upon  April  12,  1897, 
the  lease  was  extended,  making  the  full  term  sixty-five  years,  expir- 
ing March  14,  1954.  (Exhibit  IV,  Sec.  I.) 

The  similarity  between  this  operating  agreement  and  the  one 
made  in  1886  between  the  North  Side  companies  suggests  that  both 
were  conceived  by  the  same  brain.  Such,  indeed,  was  the  fact,  for 
the  West  Chicago  Street  Railroad  Co.  was  dominated  by  the  same 
men  who  controlled  the  United  States  Construction  Co.  and  the 
North  Chicago  Street  Railroad  Co.  A  further  similarity  is  to  be 
seen  in  the  fact  that  a  majority  of  the  stock  of  the  lessor  was  owned 
by  the  lessee  at  the  time  the  agreements  of  1888  and  1889  were  con- 


CHICAGO   STREET   RAILWAYS.  35 

summated.  Thus  the  minority  stockholders  were  the  ones  prin- 
cipally affected,  as  in  the  case  of  the  North  Side  company. 

The  operations  under  these  agreements  cannot  be  definitely 
stated,  as  the  books  of  the  company  are  inaccessible.  But  the  fol- 
lowing estimates  are  sufficiently  accurate  for  all  practical  purposes. 
Since  1889  4-4  miles  of  horse  railroad  have  been  constructed  at  a 
cost  of  $104,737.66,  making  the  original  cost  of  the  34.19  miles  of 
horse  railroad  $814,504.67.  Upon  December  31,  1897,  there  re- 
mained 2.38  miles,  which  cost  $56,705.12,  leaving  $757,799.55  to 
represent  depreciation  due  to.  conversion  of  the  road  into  cable  and 
electric  traction.  (Exhibit  V,  Sec.  4.) 

The  original  cost  value  of  the  assets  existing  December  31,  1897, 
was  as  follows  (Exhibit  IV,  Sec.  4) : 

2.836  miles  single  track  cable $273,547.60 

0.314  miles   single  track   cable 43,715-51 

2.38    miles  single  track  horse  railroad 56,705.12 

28.585  miles  single  track  electric  railroad 542,240.07 

Real  estate  and  buildings 761,202.99 

Total    $1,677,411.29 

The  outstanding  liabilities  upon  the  same  date  were  (Exhibit  IV, 
Sec.  5): 

First  mortgage  6  per  cent,  bonds $400,000.00 

Consolidated  5  per  cent,  bonds 1,334,000.00 

Capital    stock 1,340,300.00 

Due  W.  Chi.  St.  R.  R.  Co 49,158-49 

Total    $3,123,458.49 

Upon  the  face  of  these  figures  liabilities  exceed  assets  to  the 
extent  of  $1,446.047.20.  It  is  quite  likely  that  a  re-appraisement  of 
the  real  estate  would  reduce  this  deficit  considerably,  perhaps  to 
$500,000.  (Exhibit  IV,  Sec.  5.)  But  as  no  allowance  has  been 
made  for  depreciation,  the  original  cost  value  being  given  above, 
the  present  value  of  all  assets  does  not  exceed  $1,300,000,  allowing 
for  appreciation  of  real  estate,  and  probably  is  less. 

West  Side— West  Division  Railway  Co. 

Returning  now  to  the  West  Division  Railway  Co.,  the  books 
show  that  it  was  incorporated  February  21,  1861.  About  1863  it 
purchased  the  West  Side  lines  of  the  Chicago  City  Railway  Co. 
and  their  extensions  to  the  business  center  of  the  city,  paying  about 


36  MUNICIPAL    AFFAIRS. 

$200,000,  according  to  current  report.  Upon  October  20,  1887, 
the  date  of  the  agreement  with  the  West  Chicago  Street  Railroad 
Co.,  the  West  Division  Railway  Co.  owned  98.45  miles  of  horse 
road.  The  construction  cost  was  $1,935,131.52,  or  $19,655.98  per 
mile.  This  comparatively  low  figure  was  due  principally  to  the 
practice  of  paying  for  extensions  and  betterments  out  of  surplus 
earnings,  and  to  the  small  amount  of  paving  and  poor  character. 
Only  14  out  of  a  total  of  98.45  miles  of  track  were  paved,  and  those 
mostly  with  cheap  macadam.  Upon  October  20,  1887,  the  original 
cost  of  all  assets,  including  7,300  shares  of  Chicago  Passenger  Rail- 
way Co.  capital  stock,  was  $5,468,071.17.  The  total  outstanding 
liabilities  amounted  to  $4,816,511.06,  showing  a  surplus  of  $651,- 
560.1 1.  (Exhibit  V,  Sec.  2.) 

Computing  the  value  of  the  securities  at  market  rates,  the  value 
of  the  physical  property  at  $3,700,000  and  the  miscellaneous  ac- 
counts at  their  face  value,  one  finds  that  the  franchise  was  worth  at 
least  $5,800,000,  and  possibly  over  $6,ooo,ooo.1 

The  West  Chicago  Street  Railroad  Co.  was  incorporated  July 
19,  1887,  and  upon  the  following  November  n,  when  a  lease  of  the 
Chicago  West  Division  Railway  was  proposed  and  approved,  99,497 
of  the  100,000  shares  of  stock  were  voted  by  C.  T.  Yerkes.  At  that 
time  Messrs.  Widener,  Elkins  and  Kemble  apparently  owned  6,251 
of  12,500  shares  of  stock  of  the  Chicago  West  Division  Railway 
Co.,  one  share  more  than  one-half  of  the  entire  number.  Thus  the 
lease  was  virtually  made  by  Mr.  Yerkes  upon  one  side  and  Messrs. 
Widener,  Elkins  and  Kemble  upon  the  other,  although  nominally 
the  lessee  was  the  Chicago  West  Division  Railway  Co.  (Exhibit 
VI,  Sec.  i.) 

The  language  of  the  agreement  was  somewhat  vague  and  in- 
volved, but  in  the  light  of  subsequent  operations,  its  provisions  are 
quite  clear.  In  substance  it  dealt  with  three  matters:  (i)  The 

*It  is  difficult  to  select  the  proper  price  at  which  to  estimate  the  stock.  During 
1886  the  quotations  ranged  about  $400  per  share  bid  and  $425  asked.  In  May, 
1887,  they  had  risen  to  $475  bid  and  $600  asked.  The  net  earnings  for  ten  months 
preceding  the  signing  of  the  agreement  were  at  the  rate  of  35  per  cent,  per  annum 
upon  the  capital  stock,  which  would  give  a  market  value  of  $700  per  share  upon  a 
5  per  cent,  basis,  or  $650  conservatively  estimated.  The  above  franchise  value  has 
been  computed  upon  a  $475  basis;  but,  assuming  that  the  stock  would  bring  $650 
per  share,  the  franchises  would  be  worth  $8,000,000  instead  of  $5,800,000.  (See 
Exhibit  VI.,  Section  6.) 


CHICAGO    STREET    RAILWAYS.  37 

construction  of  a  cable  road;  (2)  the  lease  of  the  entire  property 
of  the  Chicago  West  Division  Railway  Co.  to  the  West  Chicago 
Street  Railroad  Co.;  (3)  the  transfer  of  the  6,251  shares  owned  by 
Messrs.  Widener,  Elkins  and  Kemble.  As  to  the  first,  it  was  stipu- 
lated that  the  lessee  should  build  not  less  than  17  miles  of  cable 
road,  and  for  the  purpose  of  an  accounting,  should  keep  an  accurate 
account  of  the  cost  of  all  permanent  improvements.  As  regards 
the  second,  the  franchises  and  property  of  lessee,  including  the  7,300 
shares  of  the  Chicago  Passenger  Railway  Co.,  were  to  be  leased  to 
the  West  Chicago  Street  Railroad  Co.  for  999  years,  in  return  for 
which  the  lessee  was  to  pay  the  lessor  company  35  per  cent,  per 
annum  upon  the  capital  stock,  or  $109,375  quarterly,1  and  assume 
the  outstanding  bonded  debt  of  the  old  company,  amounting  in  all 
to  $4,070,000.*  As  compensation  for  the  transference  of  the  6,251 
shares  of  stock  and  the  negotiation  of  the  lease,  Messrs.  Elkins, 
Widener  and  Kemble  were  to  receive  $4,100,000  in  5  per  cent.  40- 
year  bonds  of  the  lessor  and  $6,000,000  in  cash  or  capital  stock  at 
the  option  of  the  lessee.  (Exhibit  VI,  Sees.  1-5.) 

Upon  its  face,  the  agreement  seems  to  be  very  fair  to  all  par- 
ties concerned,  except  possibly  the  lessee.  Messrs.  Elkins,  Wid- 
ener and  Kemble  certainly  had  no  cause  for  complaint,  as  they 
received  $10,100,000  in  securities,  worth  more  than  par,  for  nego- 
tiating the  lease  and  for  6,251  shares  of  stock  which  could  not  have 
cost  them  more  than  $4,375,700  ($700  per  share),  and  probably  con- 
siderably less,  even  if  they  did  not  secure  an  option,  which  they 
could  have  done  early  in  1887  at  very  little  expense.  Five  million 
dollars  for  negotiating  the  lease  is  a  very  remunerative  compensa- 
tion, and  it  is  not  easily  explicable  why  Mr.  Yerkes  should  have 
agreed  to  such  an  enormous  and  apparently  uncalled  for  expense, 
unless  he  expected  to  recoup  his  losses  by  subsequent  operations,  or 
had  an  exaggerated  idea  of  the  value  of  the  West  Side  properties, 
and  could  not  secure  control  without  accepting  these  rather  hard 
terms.  Probably  there  is  some  truth  in  each  of  these  suppositions, 

'This  would  be  equivalent  to  an  annual  payment  of  17  per  cent,  upon  the 
maximum  estimated  value  of  the  plant,  exclusive  of  the  franchise. 

'One  may  wonder  at  the  apparent  inconsistency  between  amount  of  the  bonded 
debt  given  here  and  upon  page  above.  The  additional  amount  here  given — $1,052,000 
— was  issued  during  the  transferrence  of  the  property  in  order  to  fund 
debt  and  settle  accounts. 


38  MUNICIPAL    AFFAIRS. 

but  $10,100,000  for  stocks  having  a  face  value  of  $625,100  is  an 
enormously  high  price;  $1,615  for  a  share  of  stock  whose  face  value 
is  $100,  and  worth  in  the  market  not  more  than  $700,  is  an  unusual 
offer,  and  most  men  would  sell  at  a  much  smaller  profit.  And  when 
a  majority  of  the  stock  had  been  secured  in  the  open  market,  any 
sort  of  a  contract  could  have  been  made  between  the  two  com- 
panies, for  Mr.  Yerkes  would  then  control  both  companies.  How- 
ever, Mr.  Yerkes  probably  depended  upon  subsequent  operations 
to  offset  the  large  sum  paid  by  his  company,  and  we  shall  see  that 
he  did  not  miscalculate. 

The  lessor  certainly  received  all  its  properties  were  worth. 
Its  bonds  were  all  guaranteed,  and  later  obligations  of  the  lessee 
were  substituted  for  them  relieving  it  of  all  liability  in  this  direc- 
tion. Thus  the  stockholders  were  to  receive  35  per  cent,  dividends 
clear.  This  was  their  full  market  value  and  indeed  somewhat  more, 
if  we  take  into  consideration  the  fact  that  most  of  the  franchises 
expire  in  1903  and  1905,  and  practically  all  of  them,  if  the  99-year 
act  of  1865  should  not  be  upheld  by  the  courts. 

The  only  offset  is  the  cable  road  which  the  agreement  pro- 
vided for  and  seemed  to  stipulate  should  be  paid  for  by  the  lessor 
at  cost.  But  the  agreement  was  never  fully  carried  out,  the 
amount  charged  was  excessive  and  although  the  bonds  are  guaran- 
teed and  the  interest  paid  by  the  lessee,  a  debt  has  been  incurred 
which  was  much  larger  than  anticipated  and  which  must  be  settled 
when  the  agreement  is  terminated.  This  was  one  way  in  which 
Mr.  Yerkes  expected  to  get  even,  for  he  was  a  stockholder  in  the 
United  States  Construction  Co.,  which  did  the  work  and  received 
the  unusually  high  price.  This  agreement  will  be  given  further  on, 
when  the  operations  of  the  lessee  are  fully  treated. 

The  books  of  the  West  Chicago  Street  Railroad  Co.  contain 
no  detailed  account  of  the  17  miles  of  cable  road  to  be  constructed. 
They  merely  show  that  on  November  17,  1887,  a  contract  with  the 
United  States  Construction  Co.  was  authorized  for  a  road  upon  cer- 
tain streets,  for  which  $4,000,000  in  cash  or  stock,  at  the  option  of 
the  railroad  company,  was  to  be  paid.  Under  this  contract  17.47 
miles  were  built,  but  just  how  much  of  it  was  chargeable  to  the 
lessor  it  is  impossible  to  say.  (Exhibit  VI,  Sec.  2.) 


CHICAGO    STREET   RAILWAYS.  39 

The  financial  condition  of  the  company  upon  December  31, 
1897,  is  shown  by  the  following  summaries.     Of  the  original  road 

and  the  extensions  there  existed  upon  that  date  (Exhibit  V,  Sec.  5) : 

6.26  miles  single  track  horse  road $123,046.43 

68.68  miles   single   track   electric 825,163.04 

68.68  miles  paving,    relaid 4U,495-93 

11.655  miles  single  track  cable  road  (actual) 1,124,188.06 

.321  miles  single  track  cable  road  (actual) 44,690.05 

13.404  miles  single  track  cable  road  (estimated) 1,292,888.56 

Real  estate  on  Oct.  20,  1887 449>iS8-73 

Buildings  on  Oct.  20,  1887 927,984.00 

Western  Ave.  power  house 520,455.65 

Halsted  St.  car  house  alterations 11,803.70 

New   building,    Clybourn   place 52,839.50 

Total    $5,783,713.65 

The  outstanding  liabilities  were  as  follows: 

Capital  stock $1,250,000.00 

First  mortgage  bonds 4,070,000.00 

Due  West  Chi.  St.  R.  R.  Co 4,869,998.38 


Total    $10,189,998.38 

showing  a  deficit  of  $4,406,284.73,  $1,858,738.60  of  which  was  due 
to  the  substitution  of  cable  and  electric  traction  for  the  old  horse 
railroad,  and  the  remainder— $2,547,501.13 — represents  the  loss  by 
the  transfer  of  the  operating  plant  to  the  lessee  and  the  amount, 
which  the  United  States  Construction  Co.  overcharged  the  lessee 
for  construction  work  and  which  overcharge  this  company  debited 
to  the  account  of  lessor,  contrary  to  the  agreement  of  1887. 

The  actual  deficit  is  much  larger  than  that  shown  by  the  books. 
The  present  worth  of  the  plant  is  not  more  than  $4,000,000.  This 
would  swell  the  deficit  to  $6,200,000.  In  other  words,  the  physical 
property  would  about  wipe  out  the  bonds,  and  the  stockholders 
would  have  nothing  but  the  agreement  with  the  lessee  to  fall  back 
upon.  As  long  as  this  remains  unimpaired  they  have  no  fault  to 
find,  for  their  35  per  cent,  dividends  are  being  declared  regularly. 
But  in  case  the  contract  should  be  terminated  for  any  reason,  they 
would  be  face  to  face  with  a  large  debt,  nearly  $5,000,000,  and  only 
a  few  franchises  with  which  to  pay  it.  If  most  of  these  should  be 
terminated  in  1903  and  1905,  little  could  be  realized  from  this 
source,  certainly  not  enough  to  pay  the  debts  and  reimburse  the 
stockholders. 


40  MUNICIPAL    AFFAIRS. 

West  Side— West  Chicago  Street  R.  R.  Co* 

The  West  Chicago  Street  Railroad  Co.  was  incorporated  July 
19,  1887,  and  almost  immediately  leased  the  franchises  and  prop- 
erty belonging  to  the  two  existing  lines  upon  the  West  Side,  as 
stated  in  the  preceding  pages.  Its  capital  stock  was  $10,000,000,  of 
which  $9,949,700  was  voted  upon  by  Mr.  Yerkes  as  late  as  Novem- 
ber n,  1887.  (Exhibit  VI,  Sec.  3.) 

Among  the  first  operations  of  the  company,  after  the  lease  of 
1887  with  the  Chicago  West  Division  Railway  Co.  had  been  ap- 
proved, was  the  making  of  a  contract  with  the  United  States  Con- 
struction Co.,  controlled  by  Messrs.  Yerkes,  Elkins,  Widener  and 
their  associates,  for  a  cable  line,  which  is  set  forth  above.  The 
methods  by  which  the  debt  of  $4,000,000  was  paid  become  impor- 
tant at  this  point,  as  they  reveal  the  way  in  which  the  capital  stock 
was  finally  issued. 

According  to  the  books,  $4,000,000  in  cash  was  paid  to  the 
United  States  Construction  Co.,  which  deposited  $4,000,000  in  capi- 
tal stock  of  the  railroad  company  with  Mr.  George  E.  Newlin  as 
trustee,  with  the  understanding  that  it  should  be  paid  back  as  the 
work  was  completed.  The  last  payment  of  stock  was  made  Octo- 
ber 22,  1890.  Other  entries  state  that  the  United  States  Construc- 
tion Co.  subscribed  for  $4,000,000  in  capital  stock  of  the  West 
Chicago  Street  Railroad  Co.  and  paid  for  it  in  cash.  This  was  un- 
doubtedly a  mere  subterfuge.  Four  million  dollars  in  capital  stock 
was  paid  for  the  cable  road,  and  not  in  cash,  as  represented.  Mr. 
Bard  has  gone  fully  into  this,  and  his  reasons  for  accepting  this 
conclusion  and  disbelieving  the  book  entries  are  given  in  Exhibit 
VI,  Sections  2  and  3. 

The  remaining  $6,000,000  of  the  stock  was  issued  in  the  fol- 
lowing way:  According  to  the  contract  with  the  Chicago  West 
Division  Railway  Co.,  $6,000,000  in  cash  or  stock  was  to  be  paid 
Messrs.  Widener,  Elkins  and  Kemble  for  negotiating  the  lease. 
The  books  state,  also,  that  these  three  persons  subscribed  for 
$6,000,000  capital  stock  of  the  new  company,  and  paid  for  it  in 
cash.  The  money  was  immediately  repaid  to  them,  $5,000,000  on 
account  of  the  lease  and  $1,000,000  in  advance  as  part  payment 
for  the  6,251  shares  of  the  Chicago  West  Division  Railway  Co. 
stock.  For  some  time  a  special  account,  "Leasehold,"  stood  upon 


CHICAGO   STREET   RAILWAYS.  41 

the  pages  of  the  ledger  with  a  debit  balance  of  $5,000,000.  Later, 
$4,000,000  was  transferred  from  general  "Construction"  account 
and  a  new  account  opened  with  a  debit  of  $9,000,000,  and  it  still 
existed  December  31,  1897.  Of  this  sum  not  more  than  $4,000,000 
of  stock  was  actually  issued  for  cash  or  property,  and  the  payment 
of  $4,000,000  for  17.47  miles  of  cable  road  is  an  unusually  high 
price.  Some  allowance  might  be  made,  if  the  stock  were  at  a  dis- 
count or  seemed  likely  to  sell  below  par  when  issued.  But  there  is 
sligh  probability  that  this  factor  had  much  influence.  The  very 
first  Stock  Exchange  quotations,  those  of  June  14,  1889,  were  above 
par.  And,  indeed,  most  of  the  stock,  and  possibly  all  of  it,  was 
issued  before  the  6,251  shares  were  delivered  or  the  cable  road 
constructed;  so  that  the  persons  holding  it  could  have  sounded 
the  market  before  obligations  to  any  considerable  amount  had  been 
assumed  by  them.  (Exhibit  VI,  Sec.  4.) 

How  shall  we  class  the  $1,000,000  which  the  books  state  were 
given  in  part  payment  for  the  stock  to  be  transferred?  Is  it 
"water"  or  a  legitimate  capital  expenditure?  This  raises  the  ques- 
tion, How  much  was  paid  for  the  6,251  shares  of  the  stock,  $4,100,- 
ooo  in  bonds  or  $4,100,000  in  bonds  and  $1,000,000  in  stock?  Ac- 
cording to  the  earning  power  of  the  Chicago  West  Division  Rail- 
way Co.  for  ten  months  preceding  the  leasing  of  the  road,  the 
dividends  would  be  35  per  cent,  per  annum.  The  stock  would, 
therefore,  have  a  market  value  of  about  $700  per  share.  Six  thou- 
sand two  hundred  and  fifty-one  shares  would  represent  a  market 
value  of  $4,375,700.  If  $5,100,000  were  paid  at  the  rate  of  $815.86 
per  share,  the  company  would  have  paid  more  than  the  market 
value,  which  seems  very  unlikely.  Again,  the  Stock  Exchange 
quotations  seem  to  indicate  that  the  average  value  of  the  stock  ac 
the  time  the  negotiations  were  closed,  about  June,  1887,  was  about 
$650  per  share.  This  would  give  a  total  value  to  6,251  shares  of 
about  $4,100,000.  Further,  the  plans  of  financing  the  North  and 
the  West  Side  roads  were  similar  in  every  other  respect,  which 
would  strongly  lead  one  to  believe  that  the  similarity  continued 
throughout.  Messrs.  Elkins,  Widener  and  Kemble  could  well 
afiord  to  transfer  the  stock  without  making  a  profit  upon  the 
transaction  at  once,  when  they  received  $6,000,000  of  stock  for 
negotiating  the  lease.  But  very  likely  they  made  a  profit  on  the 


42  MUNICIPAL    AFFAIRS. 

stock  transaction,  which  would  lessen  still  more  the  probability  of 
$1,000,000  in  stock  being  part  payment  for  the  6,251  shares.  Thus, 
one  is  forced  to  the  conclusion  that  at  least  $6,000,000  out  of  the 
$10,000,000  original  capital  stock  was  "water,"  and  if  one  goes 
back  of  the  contract  with  the  United  States  Construction  Co.,  which 
is  probably  an  excuse  for  violating  the  agreement  between  the 
Chicago  West  Division  Railway  Co.  and  the  West  Chicago  Street 
Railroad  Co.,  about  $8,000,000  is  "water."  (Exhibit  VI,  Sees. 
6  and  7.) 

From  the  date  of  organization  to  December  31,  1897,  the 
West  Chicago  Street  Railroad  Co.  expended  $29,615,628.13.  The 
cost  value  of  the  property  existing  upon  the  latter  date  was  $16,- 
317,139.34,  leaving  a  depreciation  of  $13,298,488.79. 

Total  Cost  value  assets, 

expenditures.  Dec.  31, 1897.  Depreciation. 

Chicago    Passenger   Railway $1,156,749.52  $859,503.18  $297,246.34 

Chicago  West  Div.  Railway 14,969,998.38  3,872,028.56  11,097,969.82 

West  Chicago  Street  Railroad...       13,488,880.23  11,585,607.60  1,903,272.63 

Total    $29,615,628.13       $16,317,139-34        $13,298,488.79 

Analyzing  the  depreciation  of  the  companies,  one  finds  that  of 
the  $297,246.34  belonging  to  the  Chicago  Passenger  Railway  Co., 
$104,737.66  was  due  to  the  removal  of  4.396  miles  of  new  horse  road 
and  the  construction  of  a  trolley  road  in  its  place.  The  remainder, 
$192,508.68,  is  the  difference  between  the  contract  price  and  the 
estimated  cost  of  2.836  miles  of  cable  road  built  by  the  United 
States  Construction  Co.  (Exhibit  VI,  Sec.  8.) 

Perhaps  a  few  words  justifying  this  procedure  will  not  be  out 
of  place  here,  as  the  plan  has  generally  been  followed  of  estimating 
the  actual  cost  when  the  amount  charged  by  the  United  States 
Construction  Co.  has  seemed  to  be  exorbitant  in  comparison  with 
other  lines  built  by  other  companies.  The  United  States  Construc- 
tion Co.  was  controlled  by  Messrs.  Elkins,  Widener,  Yerkes  and 
their  associates.  These  same  parties,  either  directly  through  the 
United  States  Construction  Co.,  which  often  held  stock  in  the 
companies  with  which  it  made  contracts,  or  indirectly  by  owning 
stock  in  these  companies  personally,  controlled  a  majority  of  the 
stock  of  the  railroad  companies.  This  enabled  them  to  make  any 
sort  of  an  agreement.  To  assume  that  a  contract  made  under 
such  conditions  would  necessarily  be  fair  to  all  parties  and  repre- 


CHICAGO   STREET   RAILWAYS.  43 

sent  what  would  be  agreed  upon  by  two  entirely  disconnected  par- 
ties, requires  too  implicit  confidence  in  human  nature.  Thus,  when 
we  find  that  the  price  agreed  upon  is  very  much  more  than  the  cost 
of  similar  work  done  by  other  companies,  even  allowing  for  fair 
contractor's  profits,  it  is  doing  no  injustice  and,  indeed,  it  is  neces- 
sary, if  one  is  to  get  at  the  worth  of  the  plant,  to  estimate  the 
original  cost  of  the  present  plant  at  what  other  companies  would 
have  performed  the  service.  This  is  what  Mr.  Bard  has  done,  and 
in  accepting  his  figures,  I  approve  his  methods. 

The  depreciation  set  opposite  the  Chicago  West  Division  Rail- 
way Co. — $11,097,969.82 — is  distributed  among  the  following 
items:  Difference  between  contract  price  and  estimated  cost 
of  the  13.404  miles  of  cable  road  built  by  the  United  States 
Construction  Co.,  $915,067.26;  1.96  miles  of  horse  road  converted 
into  trolley  road,  $46,698.51;  miscellaneous  expenditures,  $36,- 
204.05;  price  paid  for  negotiating  lease,  $5,000,000;  cost  of  6,251 
shares  of  Chicago  Passenger  Railway  Co.  stock,  which  have  no 
physical  property  as  security,  $5,100,000;  total,  $11,097,969. 

The  depreciation  of  the  West  Chicago  Street  Railroad  Co. 
amounted  to  $1,903,272.63,  apportioned  as  follows :  The  difference 
in  contract  price  and  estimated  cost  of  the  1.23  miles  of  single  track 
cable  road  built  by  the  United  States  Construction  Co.,  $85,069.91 ; 
50.32  miles  single  track  horse  road  converted  into  trolley  road, 
original  cost  $1,132,178.36,  deduct  for  street  pavement  relaid  $261,- 
781.75 — $870,396.61;  depreciation  in  equipment,  $286,192.11;  mis- 
cellaneous items  charged  to  construction  account,  $661,614;  total, 
$1,903,272.63. 

Including  the  property  transferred  under  the  agreements  be- 
tween the  companies,  the  final  settlement  as  to  the  6,251  shares  of 
stock  in  the  Chicago  Passenger  Railway  Co.  and  the  cash  on  hand 
December  31,  1897,  the  above  summary  would  be  changed  to  read 
(Exhibit  VI,  Sec.  9) : 

Book  value  assets.  Cost  value.  Appreciation. 

Chicago   Passenger   Railway...          $49,158.40  $1,677,411.29  $1,628,252.80 

Chicago  West  Div.  Railway 4,869,998.38  5,783,713-65  913,715-27 

Depreciation. 
West  Chicago  Street  Railroad.      24,158,908.70  11,585,607.60  12,573,301.10 


Total    $29,078,065.57          $19,046,732.54          $10,031,333.03 


44  MUNICIPAL    AFFAIRS. 

The  cost  value  of  the  assets  of  the  two  lessor  companies  are 
apparently  in  excess  of  the  book  value,  according  to  the  last  sum- 
mary, but  this  is  because  the  first  column  shows  the  liabilities  of 
these  companies  to  the  West  Chicago  Street  Railroad  Co.  only, 
whereas,  if  the  remaining  liabilities  are  considered,  the  result  would 
be  as  follows  (Exhibit  VI,  Sec.  9): 

Cost 

Total  liabilities,      value  properties.  Deficit. 

Chicago  Passenger  R'way  Co. .      $3,123,458.49            $1,677,411.29  $1,446,047,20 

Chicago  West  Div.  Railway...      10,189,998.38              5,783,713.65  4,406,284.73 

West  Chicago  Street  Railroad.      28,358,252.67            11,585,607,60  16,772,645.07 

Totals    $41,671,709.54          $19,046,732.54          $22,624,977.00 

When  the  outstanding  liabilities  are  analyzed  still  further,  one 
finds  that  in  each  case  the  cost  of  the  property  is  less  than  the 
bonds  and  floating  debt,  as  shown  by  the  following: 

Bonds  and  Cost 

Floating  debt.        value  of  property.  Deficit. 

Chicago  Passenger  R'way  Co. .     $1,783,158.49  $1,677,411.29  $105,747.20 

Chicago  West  Div.  Railway...       8,939,998.38  5,783,713.65  3,156,284.73 

West  Chicago  Street  Railroad.      15,169,252.67  13,299,321.2s1  1,869,931.42 

Totals    $25,892,409.54          $20,760,446.19  $5,131,963.35 

Adding  the  bonds  outstanding,  the  total  deficit  would  be : 

Total  deficit. 

Chicago  Passenger  Railway  Co $1,446,047.20 

Chicago  West  Division  Railway 4,406,284.73 

West   Chicago   Street   Railroad 15,058,931.42 

Total    $20,911,263.35 

As  a  matter  of  fact,  the  companies  are  in  a  still  worse  condition 
than  this.  The  status  of  the  first  two  companies  has  been  given 
above.  The  West  Chicago  Street  Railroad  Co.  alone  remains  to 
be  dealt  with.  According  to  the  above  tables,  this  company  has 
assets,  the  cost  of  which  was  $11,585,607.50.  But,  as  every  one 
knows,  the  present  market  value  of  the  plant  is  considerably  less 
than  the  original  cost.  The  depreciation  is  certainly  not  less  than 
$1,500,000  and  probably  more.  In  other  words,  the  plant,  securi- 
ties and  accounts  receivable  would  perhaps  wipe  out  the  bonds 

'The  cost  value  of  property  in  this  table  is  $1,713,713.65  more  than  in  the 
preceding  tables,  which  is  due  to  this  fact:  The  cost  value  of  the  C.  W.  D.  R.  is 
$5,783,713.65,  or  $1,713,713.65  more  than  the  bonds  outstanding,  to  pay  which  the 
property  has  been  mortgaged.  Thus  this  amount  should  be  transferred  to  the  credit 
of  W.  C.  S.  R.  R.  Co.,  whose  claim  it  would  be  used  to  liquidate,  making  it* 
assets  $13,299,321.25,  instead  of  $11,585,607.60. 


CHICAGO    STREET    RAILWAYS.  45 

and  miscellaneous  indebtedness,  leaving  the  stock  and  the  certifi- 
cates of  indebtedness  to  be  reimbursed,  if  at  all,  out  of  the  fran- 
chise rights,  which  are  far  from  being  ample  security  in  case  the 
franchises  should  be  terminated  by  the  action  of  the  courts,  the 
city  council  or  the  legislature. 

Chicago  Union  Traction  Co* 

Since  the  date  at  which  Mr.  Bard's  investigation  ends,  Decem- 
ber 31,  1897,  there  have  been  several  operations  of  considerable 
importance.  Another  company  has  been  formed  and  new  leases 
made  between  it  and  the  North  Chicago  Street  Railroad  Co., 
and  the  West  Chicago  Street  Railroad  Co.,  thus  bringing  under  one 
management  all  the  important  lines  upon  the  North  and  West  sides 
of  the  city.  It  also  controls,  through  an  operating  agreement, 
the  Chicago  Consolidated  Traction  Co.,  which  has  a  large  number 
of  suburban  lines. 

This  company  was  the  Chicago  Union  Traction  Co.,  organized 
May  24,  1899,  and  composed  of  New  York,  Philadelphia  and 
Chicago  capitalists.  Its  first  act  was  to  purchase  Mr.  Yerkes'  hold- 
ings in  the  two  companies,  amounting  to  32,000  shares  of  stock  of 
the  West  Chicago  Street  Railroad  Co.  out  of  a  total  of  131,890,  and 
20,000  shares  of  the  North  Chicago  Street  Railroad  Co.  of  a  total 
of  79,200  outstanding.  It  also  leased,  June  i,  1899,  from  these  two 
companies  all  their  property  and  franchises,  including  the  stocks  in 
other  companies  which  they  had  acquired  in  1886,  1887,  1888  and 
subsequent  years.  Thus  the  new  company  controls  the  North 
Chicago  City  Railway  Co.,  the  Chicago  Passenger  Railway  Co.  and 
the  Chicago  West  Division  Railway  Co.,  as  it  owns  a  majority 
of  the  stock,  although  it  does  not  own  a  major  portion  of  the 
stock  of  the  North  Chicago  Street  Railroad  Co.  and  the  West 
Chicago  Street  Railroad  Co. 

In  return  the  Chicago  Union  Traction  Co.  agreed  to  assume 
all  the  obligations  of  the  lessor  companies,  to  guarantee  their  bonds, 
to  pay  all  sums  called  for  by  the  preceding  agreements  between  the 
companies,  to  pay  the  North  Chicago  Street  Railroad  Co.  $237,600 
each  quarter — equivalent  to  a  12  per  cent,  annual  dividend  upon 
the  capital  stock  of  the  company — and  to  pay  the  West  Chicago 
Street  Railroad  Co.  $197,835  per  quarter — equivalent  to  6  per  cent.' 
a  year  upon  the  capital  stock — these  being  the  rates  of  dividends 


46  MUNICIPAL    AFFAIRS. 

which  the  companies  were  paying  at  that  time.  To  secure  the 
lessor  companies,  $10,000,000  in  cash  or  securities  were  to  be  de- 
posited with  the  Illinois  Trust  and  Savings  Bank  as  trustee,  and 
$3,200,000  in  stock  of  the  West  Chicago  Street  Railroad  Co.  and 
$2,000,000  in  stock  of  the  North  Chicago  Street  Railroad  Co.  have 
been  deposited.  The  market  value  of  these  securities  was  about 
$7,200,000  upon  July  i,  1901. 

The  operating  agreement  with  the  Chicago  Consolidated  Trac- 
tion Co.  concerns  us  little,  as  the  lines  operated  by  this  company 
have  not  been  examined. 

The  outstanding  capital  stock  of  the  company  is  $12,000,000 
preferred,  5  per  cent,  cumulative,  and  $20,000,000  common.  It  has 
issued  no  bonds,  but  under  the  agreement  guarantees  the  bonds  of 
the  lessor  companies  amounting  to  $25,770,000  for  the  North  Side 
and  West  Side  companies  and  $6,750,000  for  the  Chicago  Con- 
solidated Traction  Co.,  total  $32,527,000. 

The  original  cost  value  of  the  assets  July  i,  1900,  were:1 

ASSETS. 

Constructon   $116,688 

Reconstruction    216,026 

Real  estate 158,922 

Equipment 268,760 

Stocks  and  bonds 382,344 

Coupon   deposits 143,470 

Miscellaneous    538,947 

Accounts  receivable 257,941 

Cash  130,034 


$2,213,132 

LIABILITIES. 

Capital  stock $32,000,000 

Bills  and  accounts  payable 931,954 

Employees'  deposits 61,588 

Coupons  164,170 

Accrued   liabilities 1,032,637 

Miscellaneous  42,816 

$34,233,165 

There  was  in  1900,  therefore,  a  deficit  of  $32,020,033.  That 
is,  by  the  formation  of  the  new  company,  $32,000,000  have  been 
added  to  the  capitalization  of  the  street  railroad  companies  above 

'The  last  report  of  the  company  does  not  contain  a  statement  of  assets  and 
liabilities,  so  it  has  been  necessary  to  adopt  the  statement  given  in  the  Investors' 
Manual,  which  is  the  company's  report  for  year  ending  June  30,  1900. 


CHICAGO   STREET   RAILWAYS.  47 

any  increase  in  the  physical  property.  It  is  true,  the  company 
owned  stocks  in  various  companies  amounting  to  a  par  value  of 
$6,805,200,  or  a  market  value  of  $13,493,750.  But  as  these  com- 
panies do  not  have  assets  (exclusive  of  the  franchises)  of  sufficient 
value  to  meet  their  outstanding  obligations,  it  is  quite  correct  to 
exclude  them  from  the  assets  and  to  say  there  is  a  deficit  of 
$32,000,000.  In  other  words,  the  assets  equal  the  liabilities,  ex- 
cluding the  capital  stock,  leaving  as  security  for  the  stockholders 
only  the  franchises  which  the  company  has  leased  from  the  other 
companies.  And  yet  the  company  paid  the  lessor  companies,  as 
per  agreement,  and  made  a  profit  for  its  own  stockholders  of  3  3-4 
per  cent,  during  1899-1900.  But  after  July,  1900,  no  dividends  were 
paid  until  July  i,  1901,  which  seems  to  indicate  that  the  franchises 
have  been  overcapitalized,  and  that  the  limit  had  been  reached  in 
the  attempt  to  so  water  the  capital  stock  and  bonds  as  to  bring  the 
rate  of  profit  down  to  the  market  rate — 5  or  6  per  cent.  However, 
the  increasing  value  of  the  franchises  caused  by  increasing  popula- 
tion will  doubtless  enable  the  company  soon  to  pay  a  fair  dividend. 
The  overcapitalization  of  the  franchise  is  only  temporary. 

Coming  now  to  the  question  as  to  what  the  companies  could 
do  if  the  water  were  squeezed  out  of  their  capitalization  and  the 
liabilities  were  equal  to  the  market  value  of  their  properties,  we 
find  that  the  Chicago  Union  Traction  Co.  made  net  earnings  during 
1900-1901  of  $3,031,073,  not  including  dividends  on  stocks  owned 
or  leased,  interests  on  deposits  and  premiums.  Upon  a  capitaliza- 
tion of  $14,800,000 — the  estimated  present  market  value  of  the 
operating  plant  and  equipment — this  would  yield  a  dividend  of  over 
20  per  cent,  annually.  The  company  could  pay  the  city  over  25 
per  cent,  of  the  gross  earnings  and  still  declare  8  per  cent,  dividends 
annually.  Or,  it  could  pay  the  city  over  21  per  cent,  of  gross  earn- 
ings, lay  aside  a  depreciation  fund  of  4  per  cent,  annually  and  pay 
6  per  cent,  dividends.  Or,  it  could  reduce  fares  to  4  cents,  upon 
the  basis  of  present  traffic,  lay  aside  a  sinking  fund  of  4  per  cent, 
annually,  and  divide  profits  amounting  to  6  per  cent.  Or,  it  could 
sell  seven  tickets  for  25  cents  and  pay  8  per  cent,  dividends.  In 
each  case  the  increase  in  traffic  resulting  from  a  lowering  of  fares 
would  make  still  further  reductions  possible. 


48  MUNICIPAL    AFFAIRS. 

Conclusion. 

Although  the  financial  operations  of  these  seven  companies 
have  been  outlined  but  briefly,  their  results  are  quite  evident. 

The  franchises  given  away  by  State  Legislature  and  City  Coun- 
cil were  at  first  only  fairly  remunerative,  but  with  the  growth  of  the 
city,  the  rapidly  increasing  density  of  population,  they  became  more 
and  more  valuable.  The  temptation  to  capitalize  them  was  too 
strong,  and  when  conversion  to  cable  and  electric  traction  became 
necessary  the  opportunity  was  found  by  which  to  accomplish  this 
end.  It  did  not  originate  then,  for  by  failing  to  write  off  capitali- 
zation as  the  plant  depreciated,  the  same  result  was  being  attained 
before.  But  this  method  did  not  water  the  stock  and  bonds  fast 
enough.  In  the  eighties  and  nineties  new  hands  took  hold  and  by 
shrewd  manipulations  soon  capitalized  the  franchises  for  all  they 
were  worth.  But  by  1899  the  franchises  had  again  outstripped 
depreciation,  and  recourse  was  had  to  new  leases  and  a  new  com- 
pany. 

The  final  result  is  that  of  the  present  outstanding  liabilities, 
amounting  nearly  to  $118,000,000,  at  least  $72,000,000  is  "water," 
and  if  one  were  to  wipe  out  the  assets  which  produce  practically  no 
income  and  are  of  little  value,  this  amount  would  approach  $90,- 
000,000.  Of  the  total  liabilities,  $74,200,000  represents  capital 
stock  and  $43,800,000  bonds  and  miscellaneous  obligations.  Thus 
all  of  the  stock  and  part  of  the  bonds  are  "water." 

The  franchise  values  for  which  the  companies  pay  the  city 
nothing  amount  nearly  to  $75,000,000 — a  sum  almost  equal  to  the 
watered  capital — which  shows  how  closely  the  companies  have  esti- 
mated the  capital  to  be  issued  upon  the  franchises. 

It  is  not  surprising,  therefore,  to  learn  that  the  companies  have 
been' paying  large  dividends,  even  upon  watered  capital.  For  ex- 
ample, the  Chicago  City  Railway  Co.  has  paid  upon  an  average 
over  42  per  cent,  annual  dividends  for  the  last  nineteen  years. 
The  North  Chicago  City  Railway  Co.  has  paid  30  per  cent,  since 
1886;  the  North  Chicago  Street  Railroad  Co.  nearly  15  per  cent, 
for  fourteen  years. 

Some  claim  might  in  justice  be  made  for  large  dividends  in 
recent  years,  or  an  excuse  offered  for  an  excess  of  liabilities  over 
assets,  if  the  roads  had  been  constructed  before  traffic  was  sufficient 


CHICAGO    STREET    RAILWAYS.  49 

to  pay  fair  dividends,  or  if  they  had  met  with  heavy  losses  due  to  no 
fault  of  their  own.  But  such  has  not  been  the  case.  The  roads 
have  almost  always  paid  fair  and  recently  enormous  dividends. 
One  line  did  lose  its  property  in  the  fire  of  1871,  but  that  was  over 
a  generation  ago  and  the  profits  were  so  large  both  before  and 
after  the  fire  that  there  has  been  ample  opportunity  to  recoup  all 
losses. 

The  large  profits  which  the  companies  are  paying  show  that 
they  can  afford  to  pay  the  city  a  generous  compensation  either  in 
the  form  of  cash  payments  or  lower  fares.  Further,  the  fact  that 
the  companies  are  using  franchises  worth  millions  and  are  paying 
nothing  for  $75,000,000  in  franchises,  leads  to  the  conclusion  that 
the  companies  ought  to  pay  considerable.  If  the  "water"  were 
squeezed  out  they  could  pay  20  per  cent,  of  gross  income  to  the 
city  and  still  declare  6  per  cent,  dividends,  while  accumulating  a 
depreciation  fund  of  4  per  cent,  annually.  Or,  fares  could  be  low- 
ered to  4  cents,  and  6  per  cent,  dividends  and  4  per  cent,  deprecia- 
tion set  aside.  Such  a  policy  would  enable  fares  to  be  still  further 
lowered,  as  the  traffic  will  increase  and  a  depreciation  fund  of  4  per 
cent,  will  keep  down  fixed  charges  or  increase  capital  value  with- 
out increasing  outstanding  liabilities.  Whatever  course  may  be 
adopted,  it  is  certain  that  the  time  has  passed  when  private  cor- 
porations can  expect  to  use  the  city's  property  without  paying  for 
it.  And  property  worth  $75,000,000  is  no  longer  to  be  had  for  the 
asking.  The  problem  is:  What  return  is  fair  to  the  city  and  to 
the  companies?  Neither  can  afford  to  be  too  grasping.  The 
welfare  of  each  depends  upon  an  equitable  solution. 


ACCOUNTANT'S    REPORT. 

EXHIBITS    I   TO    VI. 


BY  EDMUND  F.  BARD. 
EXHIBIT  I.— CHICAGO  CITY  RAILWAY  CO. 

Sec.  J.— Financial  Operations  before  Introduction  of  Cable  Traction. 

This  company  was  incorporated  February  14,  1859,  by  special 
act  of  the  Illinois  Legislature,  and  immediately  succeeded  to  cer- 
tain rights  granted  to  sundry  other  persons  by  the  city  council  of 
Chicago  August  16,  1858,  for  the  construction  and  operation  of 
street  railroads  in  the  city  of  Chicago,  work  upon  which  had  al- 
ready commenced  November  I,  1858.  By  April  25,  1859,  little  over 
one  mile  of  single  track  road  on  State  St.  from  Randolph  St.  to 
1 2th  St.  was  in  operation.  Two  months  later,  the  road  was  ex- 
tended to  22d  St.,  the  southern  limits  of  the  city  at  that  time. 

The  rails  of  this  road  were  spiked  to  the  planks  of  the  corduroy 
road  then  existing  in  State  St.  The  equipment  consisted  of  four 
cars  and  25  horses. 

Fourteen  years  later  the  mileage  had  increased  to  23  miles  sin- 
gle track  and  the  equipment  to  75  cars  and  600  horses.  Seven 
years  later  the  mileage  was  45.679  miles  single  track  and  the  equip- 
ment 292  cars  and  1,468  horses. 

Of  the  45.679  miles  of  single  track  road  existing  January  i, 
1 88 1,  three  miles,  on  Cottage  Grove  Ave.  from  Oakwood  Boule- 
vard to  55th  St.  and  thence  on  55th  St.  to  Lake  Ave.,  was  steam 
dummy  road. 

Incidentally  it  mav  be  said  that  "the  cost  per  day  of  feeding 
each  horse  was  22.6  cents ;  grooming,  8.9  cents ;  for  other  help,  in- 
cluding foremen,  nurses,  watchmen  and  watermen,  8.6  cents;  of 
tools,  blankets  and  medicine,  .01  cent;  of  bedding,  4  mills,  and  of 
shoeing,  4.2  cents,  a  total  of  46  cents." 


CHICAGO    STREET    RAILWAYS.  51 

In  1 88 1  cable  power,  as  a  means  of  transportation,  was  intro- 
duced, and  by  January  27,  1882,  the  first  section  of  9.033  miles  sin- 
gle track  cable  road  built  in  Chicago  was  in  successful  operation. 
Its  effect  in  reducing  the  operating  expenses  of  the  company  was 
immediate,  the  cost  of  operating  a  car  per  mile  being  11.2  cents, 
whereas  by  horse  power  it  was  25.6  cents,  and  by  steam  dummy 
19.8  cents.  The  gross  receipts  per  cable  car  per  mile  were  23.7 
cents,  showing  the  ratio  of  operating  expenses  for  the  new  motive 
power  47.3  per  cent. 

By  May  23,  1883,  17.898  miles  single  track  cable  road  was  in 
operation,  and  by  November  21,  1887,  a  total  of  33.585  miles  sin- 
gle track  had  been  built. 

By  the  end  of  1893,  30.261  miles  single  track  road  of  that  char- 
acter were  built,  of  which  9.114  miles  were  new  extensions  of  road 
and  the  remainder  old  horse  road  converted  into  trolley  road.  No 
further  work  of  this  description  was  done  till  1895,  when  steps  were 
taken  to  convert  the  remaining  horse  road  of  the  company  into 
electric  road,  and  by  December  31,  1897,  only  5.074  miles  single 
track  horse  road  remained. 

Prior  to  December  31,  1880,  no  actual  disbursements  had  been 
made  on  account  of  the  first  section  of  cable  road  subsequently 
built  on  State  St.  north  of  39th  St.,  with  possibly  the  exception  of 
$23,998.36  expended  on  the  building  at  State  and  2ist  Sts.  during 
1880,  which  building  subsequently  became  the  power  house  of  the 
section  of  cable  road  referred  to. 

Up  to  December  31,  1880,  the  books  of  the  company  show  $i,- 
318,062.91  paid  out  for  "Construction;"  that  is,  road-bed,  track  and 
street  paving.  According  to  this,  each  mile  of  single  track  horse 
road  then  existing  cost  $28,854.89. 

There  is  nothing  in  the  books  to  show  any  credit  to  this  account 
for  depreciation,  and,  considering  the  many  changes  that  occurred 
in  the  roadbed  from  the  inception  of  the  company  to  the  date  first 
referred  to,  all  of  which  are  part  of  the  early  history  of  street  trans- 
portation in  Chicago,  there  is  reason  for  assuming  that  the  con- 
struction account  of  the  company  on  December  31,  1880,  repre- 
sented not  only  the  first  cost  of  all  original  road,  but  all  changes 
and  reconstruction  thereof  thereafter. 

There  being  no  special  reason  for  disposing  of  this  question  ac- 
curately, no  examination  of  the  books  has  been  made  further  back 


52  MUNICIPAL   AFFAIRS. 

than  1 88 1,  except  to  show  the  actual  cost  of  road  built  during  the 
five  years  immediately  preceding  the  introduction  of  the  cable  sys- 
tem. For  example,  in  1877-8,  a  double  track  road  was  built  on 
Indiana  Ave.  between  39th  St.  and  5ist  St.,  and  thence  on  5ist  St. 
east  to  Grand  Boulevard,  a  distance  of  3.375  miles  single  track,  at 
a  cost  of  $44,026.14,  or  $13,044.80  per  mile  of  single  track.  Dur- 
ing the  same  period  a  line  was  constructed  on  Halsted  St.  from 
O'Neill  St.  south  to  the  Union  Stock  Yards,  a  distance  of  4.028 
miles  single  track,  at  a  cost  of  $53,488.59,  or  $13,279.20  per  mile 
of  single  track. 

Prior  to  the  introduction  of  the  cable  system,  it  was  the  excep- 
tion rather  than  the  rule  to  pave  the  streets  between  the  rails  in 
constructing  the  road,  nor  has  it  ever  been  the  custom  of  the  com- 
pany to  do  so  in  extending  its  road  into  outlying  territory.  As 
late  as  November 'i  8,  1888,  an  official  statement  of  the  company 
shows  that  23.14  miles  of  single  track,  or  13  per  cent,  of  the  present 
mileage,  was  paved  with  "dirt,"  in  other  words,  not  paved  at  all. 
On  January  I,  1883,  only  ij  miles  of  road  on  Clark  St.  and  i  mile  on 
Halsted  St.,  aside  from  the  cable  roads  on  State  St.  and  Wabash  and 
Cottage  Grove  avenues  north  of  39th  St.  were  paved  with  stone. 

Such  pavement  as  existed  prior  to  December  31,  1880,  consisted 
of  cheap  macadam  costing  about  fifty  cents  per  square  yard,  or 
$2,346.67  per  mile  of  single  track  laid.  This  was  the  character  of 
pavement  laid  in  1877-8  in  the  construction  of  1.663  miles  single 
track  road  on  Wentworth  avenue  from  Archer  avenue  to  29th 
street,  the  cost  of  which  section  of  road,  including  paving,  was 
$25,531.72,  or  $15,352.81  per  mile  single  track. 

No  extensions  of  road  were  made  in  1879,  but  the  following  year 
the  sum  of  $37,216.43  was  expended  on  Clark  St.  in  paving  the 
street  and  laying  new  rails.  From  all  I  can  learn  of  the  particulars 
of  this  expenditure,  it  seems  to  have  been  for  granite  paving  for 
2.347  miles  single  track  north  of  I2th  street  and  new  63-lb.  rails 
for  the  entire  line,  indicating  that  the  cost  that  year  per  mile  single 
track  for  granite  was  $2.13  per  square  yard,  and  for  482  tons  of 
63-lb.  rails  at  $29  per  ton,  $13,978,  or  $3,215.55  per  mile  single 
track.  The  first  section  of  road  built  on  the  South  Side  was  on 
State  St.  from  Randolph  St.  to  I2th  St.,  and  was  opened  for  traffic 
in  1859.  It  consisted  of  a  single  track  road  with  turnouts.  Instead 


CHICAGO   STREET   RAILWAYS.  53 

of  being  laid  on  stringers  and  cross-ties,  the  rails  were  spiked  to  the 
planks  of  the  corduroy  road  then  constituting  the  only  paving  the 
street  possessed.  Subsequently  a  double  track  was  laid  and  the 
street  between  the  rails  paved  with  granite,  as  far  south  as  I2th  St. 

This  was  the  condition  of  the  road  on  December  31,  1880,  ex- 
cept that  the  rails  had  been  extended  south  to  41  st  St. 

Estimating  the  cost  of  granite  paving  at  $9,901.34  per  mile 
single  track,  the  same  as  on  Clark  St.,  and  the  cost  of  the  re- 
mainder of  the  road-bed,  including  rails,  at  $13,044.80  per  mile 
single  track,  the  same  as  on  Indiana  avenue,  the  total  cost  of  a  mile 
of  single  track  horse  road  would  be  $22,946.80,  including  granite 
paving,  which  is  about  $6,500  more  than  the  same  road  would  cost 
at  the  present  time. 

Assuming  that  the  only  lines  of  road  possessing  no  pavement  of 
any  character  except  "dirt"  were  those  already  referred  to  on 
Halsted  St.  and  Indiana  Ave.,  the  following  estimate  of  the  cost 
value  of  45.679  miles  single  track  road  existing  on  December  31, 
1880,  is  over  rather  than  under  the  actual  cost,  viz. : 

Miles  Single  Track.    Paving.  Total  Cost 

11.515                Granite  $264,224.80 

26.761                Macadam  410,856.55 

7.403                Dirt  , 97,514.73 

45.679  Total $772,596.08 

The  difference  between  this  total  and  the  balance  already  stated 
as  standing  to  the  debit  of  "Construction"  account  on  December 
31,  1880,  to  wit.,  $545,466.83,  represents  depreciation. 

The  financial  condition  of  the  company  on  the  same  date  was 
as  follows: 

ASSETS. 

Roadbed    $772,596.08 

Real  estate 234,423.63 

Buildings    202,472.75 

Horses,  1,441  151,061.28 

Stable  property 10,323.85 

Stationary  engines 11,864.60 

Harness  13,307-21 

Office  furniture  and  fixtures 4,070.20 

Cars — 

92  open,  at  $725.00 $66,700.00 

64  2i-feet,  closed,  at    836.58 53,541.12 

78  i6-feet,  closed,  at    800.00 62,400.00 

63  i4-feet,  closed,  at    750.00 47,250.00 

Miscellaneous  equipments 23,749.02 

253,640.14 


54  MUNICIPAL    AFFAIRS. 

Bills  receivable  2,606.00 

Cash  3,976.41 

Shop  and  track  tools 12,732,59 

Storehouse  supplies 16,442.42 

Total    $1,689,517.16 

LIABILITIES. 

Capital  stock $1,500,000.00 

Bills  payable 105,000.00 

Accounts  payable 47,093.67 

Drivers'  deposits 16,977.90 

1,669,071.57 


'Surplus,  December  31,  1880 $20,445.59 

Sec.  2.— Cost  of  First  Cable  Road. 

It  does  not  appear  that  any  attempt  has  ever  been  made  by  any 
of  the  companies  to  charge  off  the  large  sum  representing  depre- 
ciation on  account  of  the  radical  changes  from  horse  road  to  cable 
road  between  1881  and  1889,  and  from  horse  road  to  electric  road 
between  1892  and  1897,  and  there  is  very  little  statistical  informa- 
tion of  value  for  this  purpose  on  file  in  the  accounting  departments 
of  the  roads,  and  apparently  no  effort  has  been  made  to  compile  it.' 

The  absence  of  data  of  this  character  has  necessitated  a  tedious 
and  laborious  search  of  the  records  covering  a  business  period  ag- 
gregating 40  years  for  all  the  companies  examined,  for  the  purpose 
of  ascertaining  and  preparing  the  necessary  information  for  this  re- 
port. 

As  regards  the  $545,466.83  chargeable  to  depreciation  on  De- 
cember 31,  1880,  already  referred  to,  it  is  suggested  that  perhaps  a 
part  of  it  represents  an  expenditure  of  some  character  in  connection 
with  buying  out  or  otherwise  disposing  of  the  old  opposition  omni- 
bus lines,  the  competition  from  which  threatened  insolvency  to  all 
concerned  at  one  time  prior  to  the  introduction  of  the  cable  system. 

^According  to  the  books  of  the  company  the  surplus  was  $676,092.43  on  the  date 
mentioned,  but,  as  already  shown,  the  difference  between  the  totals  represents  de- 
preciation, or,  strictly  speaking,  the  sum  which,  if  credit  to  "Construction  account," 
in  other  words,  marked  off  to  depreciation,  would  correctly  represent  the  cost  value 
of  all  the  property  that  had  ceased  to  exist  or  possess  any  further  utility  to  the 
company  in  conducting  its  business,  or  for  any  other  purpose. 

alt  is  difficult  with  any  degree  of  certainty  to  ascribe  reason  for  the  omission 
of  the  companies  in  this  respect,  but  there  is,  of  course,  the  supposition  that  any 
adjustment  in  the  accounts  that  will  convert  an  apparent  surplus  into  a  large  deficit 
would  be  discountenanced  by  the  stockholders  as  well  as  the  management,  and  the 
average  accounting  officer  has  not  the  temerity  to  make  the  adjustment  on  his  own 
responsibility. 


CHICAGO    STREET    RAILWAYS.  55 

As  stated  at  the  outset,  no  particular  effort  has  been  made  to 
ascertain  accurately  the  precise  nature  of  the  depreciation,  since  my 
examination  of  the  records  of  the  Chicago  City  Railway  Company 
commences  practically  at  January  i,  1881,  on  which  date  is  re- 
corded the  first  disbursement  on  account  of  the  first  section  of 
cable  road  built  in  Chicago,  viz.  :  that  on  State  St.  north  of  39th  St. 
Two  years  later,  or  in  January,  1883,  the  final  entry  of  cost  is  made 
in  the  books.1 

In  constructing  the  line  on  State  street,  it  was  necessary  to  tear 
up  and  destroy  8.597  miles  horse  road  then  existing,  and  on  Wabash 
and  Cottage  Grove  avenues  and  on  22d  St.  from  State  St.  to  Cot- 
tage Grove  Ave.  8.837  miles  of  additional  single  track  horse  road, 
making  a  total  of  17.434  miles  single  track  horse  road  destroyed, 
the  original  cost  of  which  is  still  carried  on  the  books  to  represent 
an  asset,  and  thus  constitute  part  of  the  present  surplus  of  the  com- 
pany. 

In  addition  to  the  horse  road  converted  into  cable  road  on  State 
street  north  of  39th  street,  500  feet  of  brand  new  cable  road  was 
built  on  State  street  from  300  feet  north  to  200  feet  south  of  39th 
street,  1,350  feet  on  Wabash  avenue  from  Madison  street  to  Lake 
street,  and  450  feet  on  Lake  street  from  State  street  to  Wabash 
avenue,  a  total  of  0.436  miles  single  track  entirely  new  road,  mak- 
ing the  total  mileage  of  the  first  State  street  cable  line  9.033  miles 
single  track. 

There  was  also  built  150  feet  of  single  track  new  cable  road 
on  Cottage  Grove  Ave.  south  of  39th  street,  making  a  total  mileage 
of  the  Wabash  and  Cottage  Grove  Ave.  line  8.865  miles  single 
track. 

From  the  records  I  find  the  general  character  of  the  road  de- 
scribed as  follows  : 


dates  do  not  fairly  indicate  the  time  consumed  in  the  construction  of  the 
road,  as  may  be  inferred  from  the  official  report  of  the  president  of  the  road  to  the 
stockholders  at  their  meeting  in  January,  1882,  wherein  it  is  stated  that  "work  on 
the  State  street  cable  road  commenced  June  27,  1881,  but  was  delayed  by  sewerage 
improvements  made  by  the  city  till  about  the  middle  of  August.  By  the  middle  of 
December,  1881,  nine  miles  of  single  track  were  constructed." 

At  the  stockholders'  meeting  the  following  year,  he  stated  that  "cars  com- 
menced running  January  28,  1882,  between  21  st  St.  and  Madison  St.,  and  a  few 
days  after  that  to  3Qth  St.  and  also  around  the  eight  blocks  north  of  Madison  St., 
commonly  known  as  the  loop." 

The  first  payment  for  labor  on  account  of  the  Wabash  and  Cottage  Grove 
Avenue  cable  lines  noirth  of  3Qth  St.  was  in  February,  1882,  and  the  last  i» 
May,  1883. 


56  MUNICIPAL    AFFAIRS. 

"The  track  is  supported  by  heavy  yokes  made  of  4x4  T-iron  placed  four  feet 
apart  and  the  slot  is  formed  by  parallel  bars  of  Z-shaped  iron  iron  weighing  600  Ibs. 
to  the  yard — the  whole  iron  frame-work  thoroughly  braced  and  bolted — is  sur- 
rounded by  a  heavy  and  substantial  body  of  concrete,  made  with  the  best  English 
Portland  cement." 

Ex-President  Holmes  furnishes  the  following  further  descrip- 
tion: 

"The  construction  consists  of  an  underground  tube,  through  which  the  cable, 
supported  by  grooved  pulleys,  passes  in  constant  motion,  etc.  The  tube  is  provided 
with  sewer  connections  for  drainage  and  an  open  slot  on  the  top,  through  which 
passes  a  grappling  device  etc.  The  metal  used  for  lining  the  grip  performs  2,000 
miles  of  service,  when  it  requires  renewal,  etc.  More  power  is  required  during  a 
snowstorm,  but  in  ordinary  conditions  the  operation  of  20%  miles  of  cable  in 
Chicago  has  required  477  horse  power,  of  which  389  was  used  in  moving  the 
machinery  and  cables  and  88  to  move  the  240  cars." 

In  the  construction  of  the  9.033  miles  single  track  section  on 
State  street  the  following  material  was  used: 

Iron  Ibs.  8,000,000 

Bolts   250,000 

Wagon  loads  of  gravel,  sand,  stone,  etc 50,000 

Cement  j  English bbls.  13,000 

{  American   12,000 

Cords  rubble  stone 350 

Brick 214,000 

The  cost  in  detail  was : 

1,002  tons  steel  rails,  63  Ibs.  to  yd.,  at  $27.41 $27,465.77 

11,015  iron  yokes,  at  $9.14  each 100,669.38 

300,000  feet  lumber,  at  $18.53  per  M 5,559-38 

Castings,  hardware,  etc 223,697.44 

Cement,  gravel,  sand,  rubble,  grading,  labor,  etc 153,941.23 

Teaming  and  freight 7,149-59 


Total   $518,482.79 

Strictly  speaking,  this  was  the  total  cost  of  the  9.033  miles  sin- 
gle track  belonging  tothe  State  street  line.  The  total  cost  of  the 
8.865  miles  single  track  line  on  Wabash  avenue  and  Cottage  Grove 
avenue  was  $696,857.46.  The  cost  per  mile  on  State  street  was 
$57,398.74,  and  on  Wabash  and  Cottage  Grove  avenues  $78,856.79, 
an  increase  of  33.49  per  cent. 

The  details  of  the  cost  of  the  latter  line  were  not  scrutinized  as 
closely  as  those  for  the  State  St.  line,  but  apparently  the  per  cent, 
of  increase  was  practically  uniform  in  all  particulars.  This  may  be 
inferred  from  the  following  comparison  of  material  used  in  the  con- 
struction : 


CHICAGO    STREET    RAILWAYS.  57 

t State  St. >       t Wabash  Ave. ^ 

Material.                                          9.033  miles.  Per  mile.  8.865  miles.  Per  mile. 

Iron   Ibs.   8,000,000  885,000  9,000,000  1,016,000 

Bolts  250,000  29,000  275,000  31,000 

Wagon  loads  of  gravel,  etc 50,000  5,500  60,000  7,000 

English  cement • 13,000  1,400  15,000  1,700 

American  cement  12,000  1,300  2,000  230 

Cords  rubble 350  40  550  62 

Brick 214,000  23,700  230,000  26,000 

The  cost  of  granite  paving,  which  is  not  included  in  the  above 
total,  was  for  the  State  street  line,  42,395  square  yards  at  $2.51, 
$106,402.91;  Wabash  and  Cottage  Grove  avenues,  41,475  square 
yards  at  $3.59  per  square  yard,  $149,125.11,  an  increase  of  43  per 
cent. 

Adding  the  cost  of  street  paving  to  the  previous  totals,  we  have 
the  following: 

Sections.  Total  cost.      Cost  per  mile. 

State  Street   $624,885.70  $69,178.09 

Wabash  and  Cottage  Grove  Ave 845,982.57  95,731.98 

17.898  miles  single  track $1,470,868.27  $82,180.60 

Only  one  power  house,  with  its  necessary  appurtenances  and 
machinery,  was  constructed  to  operate  the  two  sections  of  cable 
road  described,  the  cost  of  which  was  as  follows : 

2ist  St.  power  house,  engine  foundations  and  smokestack $52,214.35 

Engines  and  boilers,  4  automatic  cut-off  engines  of  250  h.  p.  each,  4  steam 

boilers  aggregating  1,000  h.  p 55,153.03 

Cable  machinery 38,633.27 


Total $146,000.65 

To  this  should  be  added  expenditures  on  the  power  house  building  in  1880.     23,098.36 


Total  cost  of  power  plant $169,999.01 

This  does  not  include  the  cost  of  land  on  which  the  power  house 
stands. 

The  total  cost  of  the  entire  system  was  $1,640,867.28,  or  at  the 
rate  of  $91,678.81  per  mile  of  single  track. 

The  total  cost,  according  to  the  books,  of  the  State  street  road- 
bed and  conduit  was  $910,034.41,  instead  of  $624,885.70,  as  stated 
above,  an  excess  og  $285,148.71 ;  and  the  cost  of  the  other  roadbed 
and  conduit  $858,634.24,  instead  of  $845,982.57,  as  stated  above,  an 
excess  of  $12,651.67.  This  is  due  to  the  following  items,  which  I 
find  included  in  the  cost  on  the  books : 


58  MUNICIPAL   AFFAIRS. 

Printing,  stationery,  telegrams  and  expenses  of  that  character $2,484.98 

Patents 16,333.00 

Legal  expenses 2,894.05 

License  fees  3,000.00 

Interest  on  bonds 3,735-57 

Cable  (only  part  of  the  cost) 7,022.76 

C.  B.  Holmes,  State  St.  line $249,678.35 

Wabash  Ave.  line 12,651.67 

262,330.02 

Total $297,800.38 

None  of  these  disbursements  have  any  immediate  connection 
with  the  cost  of  the  roadbed  proper,  although  legitimate  charges 
to  "Construction"  account,  with  possibly  the  exception  of  the  sum 
paid  or  charged  to  C.  B.  Holmes,  about  which  nothing  seems  to  be 
known,  as  the  details  are  not  on  record. 

It  appears  that  the  building  of  the  first  section  of  cable  road 
"was  accomplished  in  the  face  of  opposition  and  uncertainty  which 
would  have  staggered  men  of  less  energy  and  pluck,"  and  that  "a 
large  and  powerful  element  among  the  citizens  of  Chicago  was 
openly  opposed  to  the  change.  Some  of  the  newspapers  ridiculed 
and  attacked  the  company  in  every  way  possible." 

This  is  the  testimony  of  Mr.  Holmes  himself,  and  it  suggests 
at  once  that  possibly  some  of  the  money  charged  to  his  account 
above  may  have  gone  to  quiet  this  opposition  in  a  measure.  Such 
expenses  are  not  always  inseparable  from  street  railroad  construc- 
tion, especially  new  extensions ;  in  fact,  this  report  shows  large  pay- 
ments of  this  nature  by  all  the  companies  examined,  and  for 
changes  of  a  less  radical  character  than  the  one  mentioned  above. 
It  would  therefore  be  remarkable  if  no  such  expense  was  incurred  in 
connection  with  the  introduction  of  the  first  cable  road  into  Chi- 
cago, and  as  there  is  no  other  item  or  division  of  the  total  expense 
into  which  such  disbursements  could  be  covered  except  the  $262,- 
330.02  above  referred  to,  it  is  not  improbable  that  they  are  there. 
There  is  nothing,  however,  on  record  either  to  prove  or  disprove  it. 

There  were  other  unusual  expenses,  but  of  a  different  character, 
incurred  in  the  construction  of  the  first  sections  of  cable  road  on 
State  street,  which  were  not  repeated  in  subsequent  extensions  of 
the  system,  all  of  which,  allowing  for  difference  in  structure,  would 
seem  to  show  that  a  fair  estimate  of  the  cost  of  such  sections  of 
cable  road  as  were  subsequently  built  on  the  North  and  West  Side 


CHICAGO   STREET   RAILWAYS.  59 

roads,  the  actual  cost  of  which  is  not  shown  by  the  books  of  the 
companies,  can  not  greatly  exceed  the  cost  of  the  first  two  sections 
of  road  built  on  the  South  Side.1 

Sec.  3.— Cost  of  Cable  Roads  Compared. 

All  of  these  circumstances,  together  with  the  fact  that  the  con- 
struction of  the  section  of  cable  road  referred  to  was  essentially  ex- 
perimental, necessarily  involved  exceptional  expenditures  not  dupli- 
cated in  sections  of  cable  road  subsequently  built,  the  cost  of  which, 
compared  with  that  of  the  first  section,  brings  out  clearly  the  ex- 
cessive cost  of  the  first  two  sections  built  on  the  South  Side. 

On  the  other  hand,  in  using  this  cost  as  a  basis  for  estimating 
the  cost  of  the  first  sections  of  cable  road  built  on  the  North  and 
West  Sides,  allowance  must  be  made  for  any  differences  in  physical 
structure  of  the  roads.  In  lieu  of  the  construction  accounts,  access 
to  which,  as  elsewhere  explained  in  this  report,  has  been  denied  me, 
I  have  made  diligent  efforts  to  obtain  copies  of  the  specifications 
under  which  all  of  the  different  roads  were  built,  for  the  purpose  of 
comparison,  but  without  success. 

The  brief  description  of  the  South  Side  cable  system  already 
given,  together  with  the  actual  cost,  as  shown  by  the  books  of  the 
Chicago  City  Railway  Company,  will  afford  an  approximate  basis 
for  estimating  the  cost  of  the  North  and  West  Side  systems;  at 
least,  the  difference  in  cost  may  be  approximated  by  comparing  the 
above  mentioned  description  with  that  given  of  the  North  and  West 
Side  systems  in  the  semi-official  publication  entitled  "A  History  of 
the  Yerkes  System  of  Street  Railways  in  the  City  of  Chicago," 
to-wit : 

"San  Francisco  was  the  first  city  to  make  a  successful  trial  of  this  plan  of 
transportation.  Chicago  was  next  to  adopt  the  cable  for  her  South  Side  railway. 

*For  example  complaints  are  uniformly  made  in  the  case  of  each  company  of 
encountering  beds  of  quicksand  and  the  pipes  of  the  water,  gas  and  sewer  systems, 
and  that  in  some  instances  these  systems  had  to  be  entirely  rebuilt  at  the  expense 
of  the  companies.  In  addition,  on  the  South  Side  the  claim  is  especially  made  that 
"for  a  mile  and  a  half  south  of  I2th  street,  on  State  street,  an  average  fill  of  three 
feet  was  necessary  and  the  balance  of  the  way  from  one  to  two  feet  of  excavation 
was  necessary  to  secure  the  proper  grade." 

In  the  annual  report  to  the  stockholders  in  January,  1882,  it  is  stated  that  "as 
nearly  as  can  be  computed,  there  has  been  expended  on  the  street  and  in  machinery, 
foundations  and  buildings  fully  $150,000  for  the  benefit  of  other  lines,  that  is,  the 
sum  might  have  been  saved  had  the  company  no  expectation  of  ever  operating  any 
other  lines  than  State  street."  The  difficulty  of  obtaining  granite  blocks  is  also 
referred  to  as  follows:  "To  get  sufficient  paving  blocks  it  was  necessary  to  purchase 
from  two  quarries  in  Wisconsin,  one  in  Maine,  three  in  Massachusetts,  one  in  Mary- 
land, one  in  Virginia  and  three  in  New  York." 


60  MUNICIPAL    AFFAIRS. 

Then  came  Philadelphia.  When  the  North  Chicago  system  was  under  considera- 
tion by  Philadelphia  capitalists,  it  was  natural  that  they  should  pattern  rather 
closely  after  the  most  approved  methods  of  cable  railway  construction  in  existence. 
In  general  it  may  be  said  that  the  North  and  West  Chicago  cable  railway  is  the 
Philadelphia  system  with  improvements  added.  The  Philadelphia  conduit  consists 
of  a  tube  of  sheet  iron  1-8  inch  thick  and  4  feet  5^2  inches  in  length,  bent  into  a 
particular  shape.  The  tube  is  supported  by,  and  bolted  to,  iron  yokes  placed  4 
feet  6  inches  apart  between  centers.  The  yokes  rest  on  beds  of  concrete  about  6 
inches  deep,  and  there  is  a  concrete  filling  around  the  tubes  between  the  yokes. 
To  the  yokes  are  bolted  the  slots  and  rails  which  are  of  steel  and  peculiar  cross 
section.  The  slot  is  bolted  to  the  shoulder  of  the  yoke.  Each  rail  and  slot  is  31 
feet  in  length.  At  every  31  feet  6  inches  there  is  a  single  manhole,  one  side  of 
which  is  similar  to  one-half  of  a  yoke,  the  other  side  being  of  special  design. 
Within  the  manhole,  5  inches  below  the  conduit  proper,  and  cm  each  side  of  the 
manhole,  there  is  a  projecting  shelf  upon  which  are  bolted  two  channel  bars. 
These  channel  bars  are  placed  on  one  flange  with  the  flange  extending  away  from 
the  center  line  of  the  conduit,  and  run  parallel  to  this  line.  Upon  these  are  bolted 
the  pulley  and  its  attachments,  over  which  runs  the  cable.  At  every  square  there 
is  a  double  manhole  or  'grip  hatch/  so  called,  which  extends  on  both  sides  of  the 
conduit  proper,  and  is  essentially  a  single  manhole  on  each  side  of  the  center  line 
of  the  conduit.  These  manholes  lie  between  the  track  and  the  slot.  The  ends  of 
the  manholes  take  the  places  of  two  yokes,  supporting  the  tubes.  To  these  yokes 
are  bolted  the  sides  and  bottom — sheet-iron  plates — thus  forming  a  hollow  square 
enclosure.  Each  hole  is  furnished  with  a  lifting  door  large  enough  to  allow  the 
passage  of  one  man. 

"Running  the  entire  length  of  the  line,  and  below  the  conduit,  is  a  nine-inch 
terra  cotta  pipe  for  drainage.  This  pipe  connects  with  the  sewer  at  the  foot  of 
the  grades." 

The  most  noticeable  difference  between  the  two  systems,  as 
shown  by  the  respective  descriptions,  is  that  the  concrete  conduit 
of  the  North  and  West  Chicago  roads  is  lined  with  sheet  iron  -J  inch 
thick,  whereas  this  lining  is  entirely  absent  from  the  concrete  con- 
duit of  the  South  Side  road,  in  the  construction  of  which  a  wooden 
frame  was  used  about  which  the  concrete  was  packed  and  the  frame 
afterward  withdrawn,  while  the  iron  lining  in  the  former  case  was 
intended  not  only  to  be  a  fixture,  but  at  the  same  time  to  serve  the 
purpose  of  a  frame  or  mold  about  which  to  pack  the  cement. 

Another  noticeable  difference  is  the  absence  of  any  wood  or 
lumber  in  structure  of  the  North  and  West  Chicago  roads,  whereas 
300,000  feet  of  lumber  was  used  in  the  construction  of  the  9.033 
miles  single  track  road  constituting  the  first  section  of  cable  road 
built  on  the  South  Side.  All  of  this  wood  was  removed,  however, 
in  1887,  having  been  used  for  stringers  under  the  rails. 

At  the  same  time,  new  steel  rails,  weighing  70  pounds  to  the 
yard,  were  laid,  the  entire  cost  of  reconstruction  being  $53,642.65, 


CHICAGO    STREET    RAILWAYS.  61 

of  which  sum  $34,378.62  represented  the  cost  of  taking  up  and  re- 
laying the  track  and  $19,264.03,  or  45.44  cents  per  square  yard,  the 
cost  of  relaying  the  granite  pavement. 

By  this  change  in  the  structure  of  the  South  Side  road  the 
physical  characters  of  the  two  cable  systems  are  brought  closer  to- 
gether and  afford  a  better  basis  for  estimating  the  unknown  cost  of 
one  by  comparison  with  the  known  cost  of  the  other. 

Sec.  4.—  Construction  Expenses  in  Detail. 

The  cost  of  the  cables  used  in  operating  the  first  two  sections 
of  17.893  miles  single  track  road  on  the  South  Side  was  $27,779.44, 
or  at  the  rate  of  26  cents  per  foot.  * 

For  the  first  two  sections  of  cable  road  built  on  the  South  Side 
there  were  constructed  102  grip-cars  at  a  cost  of  $102,845.55,  or  an 
average  of  $1,008.29  each,  fifty  of  which  were  for  use  on  the  Wabash 
and  Cottage  Grove  avenue  line  and  the  remainder  on  the  State 
street  line.  a  The  same  number  of  grips  were  also  made  at  a  total 
cost  of  $12,465.22,  or  $122.21  each,  and  for  use  on  the  two  roads  in 
the  same  proportion. 

There  was  apparently  no  increase  in  the  number  of  passenger 
cars  during  1881  ;  at  least,  no  increase  was  occasioned  by  the  open- 
ing of  the  cable  line  on  State  street  in  January  of  the  following 
year,  but  by  the  end  of  1882  "fifty  new  large  and  handsome  passen- 
ger cars,  at  a  cost  of  $73,771.00,  or  $1,475.42  each,"  were  added  to 
the  rolling  stock  of  the  company. 

On  May  21,  1887,  an  extension  of  the  cable  road  on  State  street, 
from  39th  street  to  63d  street,  was  completed  and  in  operation,  and 
on  November  21,  1887,  an  extension  of  the  cable  road  on  Cottage 
Grove  avenue,  from  39th  street  to  67th  street,  and  on  55th  street 
from  Cottage  Grove  avenue  to  Lake  avenue,  including  a  loop  at 
Jackson  Park,  was  also  completed  and  in  operation. 

The  construction  of  the  State  street  extension  involved  the  tear- 
ing up  and  destruction  of  0.256  mile  single  track  horse  road  built 
prior  to  December  31,  1880,  and  5.744  miles  single  track  new  horse 


were  Swedes  steel  cables,  the  tensile  strength  of  which  is  78,000  Ibs.,  as 
against  54,000  Ibs.,  for  iron  cable  at  23  cents,  per  foot. 

"The  cost  of  the  grip-cars  differed  materially,  the  first  one  built  costing  $777.16, 
the  second,  $973;  the  next  forty,  $687.15,  and  the  remainder  at.  a  figure  which 
brought  the  average  of  the  entire  lot  up  to  $1,008.29,  as  before  stated. 


62  MUNICIPAL   AFFAIRS. 

road  built  subsequent  to  that  date  and  contemporaneous  with  the 
introduction  of  the  first  section  of  cable  road  on  State  street, 
making  a  total  of  six  miles  single  track  new  cable  road  built  at  the 
cost  of  $330,040.82,  including  granite  paving,  or  at  the  rate  of 
$55,006.80  per  mile  single  track. 

The  extension  on  Cottage  Grove  avenue  and  55th  street  neces- 
sitated the  tearing  up  of  3.125  miles  single  track  horse  road  built 
prior  to  December  31,  1880,  and  0.126  mile  single  track  horse  road 
built  subsequent  to  that  date.  It  also  involved  the  construction  of 
three  miles  single  track,  entire  new  track,  or  the  conversion  of  the 
single  track  line  on  Cottage  Grove  avenue  from  39th  street  to  55th 
street,  from  Cottage  Grove  avenue  to  Lake  avenue,  into  a  double 
track  road,  and  three  miles  single  track  entirely  new  road  on  Cot- 
tage Grove  avenue  south  of  55th  street  to  67th  street,  and  0.436 
mile  single  track  entirely  new  road  for  the  loop  at  Jackson  Park, 
making  altogether  9.687  miles  single  track  new  cable  road  exten- 
sion, at  a  cost  of  $575,408.63,  including  granite  paving,  or  at  the 
rate  of  $59,400.09  per  mile  single  track. 

Partly  in  anticipation  of  the  opening  of  the  extension  on  State 
street,  and  partly  owing  to  the  growing  traffic  on  the  line  north  of 
39th  street,  it  became  necessary  to  install  two  new  500  horse  power 
engines  and  two  new  500  horse  power  boilers  at  the  power  house  at 
2  ist  street  and  State  street,  and  to  transfer  the  four  original  smaller 
ones  for  the  use  of  the  extension  south  of  39th  street.  The  cost  of 
installing  the  new  engines  was  $44,139.17  and  boilers  $20,292.44. 
There  was  also  expended  on  the  2ist  street  power  house  $11,488.56. 
Subsequently  two  more  500  horse  power  engines  were  installed  at 
the  2ist  street  power  house  at  an  additional  cost  of  $11,000.  By 
these  changes  the  17.898  miles  of  road  north  of  39th  street  were 
operated  by  four  engines,  aggregating  2,000  horse  power,  or  in 
horse  power  per  mile,  and  the  six  miles  of  road  south  of  39th  street 
by  four  engines,  aggregating  1,000  horse  power,  or  167  horse  power 
per  mile. 

The  entire  cost  of  the  six  miles  single  track  extension  south  of 
39th  street  was  $494,210,  including  power  house,  engines,  boilers, 
cable  machinery,  granite  paving,  etc.,  or  at  the  rate  of  $82,368.33 
per  mile  single  track,  and  the  corresponding  cost  of  the  Hyde  Park 
extension  (9.687  miles  single  track)  was  $842,038.11,  or  at  the  rate 


CHICAGO    STREET    RAILWAYS.  .  63 

of  $86,924.54  per  mile  single  track.  For  this  section  of  road  a 
power  house  with  aJJ.  necessary  machinery  was  erected  on  Cottage 
Grove  avenue  and  55th  street,  including  three  500  horse  power 
boilers  and  two  engines  of  1,000  horse  power  capacity  each. 

During  1890  the  cable  line  on  Cottage  Grove  avenue  was  still 
further  extended  south  from  67th  street  to  211  feet  south  of  7ist 
street,  an  additional  1.08  miles  single  track  to  the  system  at  a  cost 
of  $64,152.10,  and  the  same  year  additional  engines  were  installed 
in  the  55th  street  power  house  at  an  expense  of  $26,500.  New  im- 
provements were  also  made  to  the  cable  machinery  at  the  2ist 
street  power  house,  at  a  cost  of  about  $40,226.80. 

In  1892  the  new  downtown  loop  was  built  for  the  Wabash  ave- 
nue line,  which  had  heretofore  been  using  the  same  loop  as  the 
State  street  line.  The  new  loop  was  built  on  Wabash  and  Michigan 
avenues,  from  Madison  to  Randolph  streets,  and  on  Madison  and 
Randolph  streets  from  Wabash  avenue  to  Michigan  avenue,  thus 
adding  0.501  mile  single  track  to  the  Wabash  avenue  cable  line. 
The  cost  of  this  loop  was  $58,465.97. 

In  the  construction  of  that  part  from  Randolph  street  to  Madi- 
son street  on  Wabash  avenue,  it  became  necessary  to  move  the 
existing  cable  track  between  these  points,  then  forming  part  of  the 
joint  loop  on  State,  Lake  and  Madison  streets  and  Wabash  avenue, 
from  the  center  of  Wabash  avenue  to  the  west  side  of  the  center 
line,  in  order  to  make  room  for  the  new  track,  thus  increasing  the 
amount  of  road  to  be  built  to  0.667  mn<e  single  track,  so  that  the 
rate  of  cost  per  mile  was  $87,655.02. 

No  new  granite  blocks  were  required  for  the  paving,  the  old 
granite  paving  being  relaid.  From  the  best  information  I  can  ob- 
tain, the  average  cost  of  labor  per  square  yard  for  laying  granite 
block  is  $0.46,  and  as  there  were  3,131  square  yards  of  paving  done, 
the  cost,  if  deducted  from  the  total  $58,465.97,  would  leave  $57,- 
025.71  to  represent  the  total  cost  of  the  section  of  cable  road  re- 
ferred to,  or  at  the  rate  of  $85,495.82  per  mile  of  single  track. 

As  the  cost  of  the  last  section  of  cable  road  built  two  years  pre- 
vious was  $59,400.09  per  mile  single  track,  exclusive  of  paving,  the 
increase  in  cost  for  the  loop  was  at  the  rate  of  $26,095.73,  or  43.93 
per  cent,  per  mile  single  track. 


64  MUNICIPAL    AFFAIRS. 

This  increased  cost  for  road  of  precisely  the  same  physical  char- 
acter as  that  previously  built  was  undoubtedly,  due  to  greater  ob- 
structions encountered  in  the  streets  in  the  business  district  than 
were  met  with  in  streets  more  remote. * 

Reference  has  been  made  to  the  fact  that  in  1887  all  the  wood 
originally  contained  in  the  section  of  cable  road  on  State  street 
north  of  39th  street  was  entirely  removed,  and  at  the  same  time  new 
7o-pound  steel  rails  laid,  at  a  total  cost  of  $53,642.65.  The  same 
improvement  was  made  in  the  8.865  miles  single  track  road  on 
Wabash  and  Cottage  Grove  avenues  north  of  39th  street,  the  same 
year,  at  a  total  cost  of  $53,701.80,  of  which  sum  $35,852.16  repre- 
sented the  taking  up  and  relaying  of  the  track,  etc.,  and  $17,849.64, 
or  42.90  cents  per  square  yard,  the  cost  of  relaying  the  old  granite 
pavement. 

Including  all  the  improvements  enumerated,  the  35.166  miles 
single  track  cable  road  cost  in  the  aggregate  $2,606,280.24,  or  an 
average  of  $74,113.64  per  mile  single  track,  and  the  aggregate  cost 
of  the  power  plants,  including  power  houses,  engines,  boilers,  cable 
machinery,  etc.,  $754,444.64,  or  a  grand  total  of  $3,360,724.88,  or 
$95,570.30  for  the  completely  equipped  and  operative  system,  ex- 
clusive of  rolling  stock  and  cable. 

Sec.  5.— Cost  of  Trolley  Lines, 

Between  December  31,  1880,  and  December  31,  1892,  104.545 
miles  single  track  horse  railroad  was  built,  of  which  5.870  miles 
single  track  was  converted  into  cable  road  as  already  stated.  Of 
the  remainder,  there  still  exists  4.818  miles  single  track,  2.752  miles 
single  track  have  been  transferred  or  leased  to  other  companies, 
1.003  miles  single  track  have  been  torn  up  and  abandoned,  and 
90.102  miles  single  track  have  been  converted  into  trolley  road. 

'Elsewhere  in  this  report  it  will  be  found  that  in  the  construction  of  the  State 
street  loop  extension  of  the  West  Chicago  Street  Railroad,  built  about  the  same 
time  as  the  Michigan  avenue  loop,  almost  the  same  ratio  of  increase  occurs  in  the 
cost  over  that  of  the  Blue  Island  Avenue,  Halsted  and  Van  Buren  Street  line.  For 
example,  the  cost  of  the  latter  line  per  mile  was  $96,455.43  and  of  the  State  street 
loop  extension,  $139,221.37  per  mile,  both  single  track,  showing  an  increase  of  44.34 
per  cent.,  or  a  slight  difference  in  the  rate  of  increase  in  the  Michigan  avenue  loop 
and  other  South  Side  cable  roads. 

There  is  reason  to  believe  that  the  obstructions  encountered  were  not  so  great 
in  the  case  of  the  Michigan  avenue  loop  as  in  the  case  of  the  West  Chicago  loop, 
the  district  covered  being  less  of  a  business  center.  In  any  event,  the  comparison 
is  valuable  in  that  it  seems  to  indicate  clearly  that  whatever  structural  differences 
there  may  be  hi  the  two  systems  of  roadbed,  the  extreme  difference  in  cost  does 
not  average  more  than  $40,000  per  mile,  single  track. 


CHICAGO   STREET   RAILWAYS. 


65 


The  introduction  of  electric  power  occurred  in  1892.  During 
that  and  the  following  year  30.261  miles  single  track  electric  road 
was  built,  at  an  expenditure  of  $519,392.15,  or  an  average  of  $17,- 
185.17  per  mile.  This  average,  however,  is  not  a  safe  basis  for 
estimating  the  cost  of  a  mile  of  trolley  road,  as  may  be  inferred  from 
the  following  detailed  schedule  of  the  different  sections  of  road  built 
and  the  actual  cost  thereof,  viz. : 

On  47th  Street,  from—                                      Miles,  S.  T.  Total  Cost.    Cost  p.  Mile. 

Kedzie  Ave.  to  Leayitt  St 2.5  $30,755.72  $12,302.29 

Leavitt  St.  to  Paulina  St 1.25  27,111.20  21,688.96 

Paulina  St.  to  Ashland  Ave 0.25  4,248.91  16,995.64 

State  St.  to  Cottage  Grove  Ave 2.  41,404.60  20,702.30 

Cottage  Grove  Ave.  to  Drexel  Boulevard...  0.302  6,356.38  21,047.62 

Drexel  Boulevard  to  Lake  Ave 1.248  19,298.59  15,463.61 

Ashland  Ave.  to  Halsted  St 2.  22,631.27  11,315.64 

Halsted  St.  to  State  St 2.  24,604.61  12,302.31 

On  63d  Street,  from — 

Ashland  Ave.  to  Center  Ave I.  19,401.19  19,401.19 

Center  Ave.  to  Wentworth  Ave \  3.936  83,752.22  21,278.52 

Cottage  Grove  Ave.  to  111.  Cent.  R.  R... .  j 

Grace,  62d,  64th  and  Stony  Island  loop....  0.709  7,731-79  10,005.20 

Illinois  Central  R.  R.  to  Stony  Island  Ave.  0.564  12,010.09  21,294.50 

Kedzie  Ave.  to  Central  Park  Ave I.  11,891.86  11,891.86 

On  6ist  Street,  from — 

State  St.  to  Wabash  Ave 0.15  2,487.78  16,585.20 

Wabash  Ave.  to  South  Park  Court )  3.674  53,967-59  14,689.06 

South  Park  Court  to  6oth  St 3 

Wentworth  Ave.  to  State  St 0.5  10,811.93  21,623.86 

On  35th  Street,  from — 

State  St.  to  Ullman  St 3.178  67,287.22  21,162.30 

Ullman  St.  to  California  Ave 4.  65,841.96  16,460.49 

Subsequently  this  line  was  extended  from — 

State  St.  to  Michigan  Ave 0.163  3,449-45  21,162.30 

Connection  was  also  made  between  6ist  and  63d  streets  on 
Cottage  Grove  avenue  and  on  State  street  from  6ist  to  6ist  street 
viaduct,  and  on  Wentworth  from  6ist  street  viaduct  to  63d  street, 
a  distance  of  one  mile,  single  track,  at  a  cost  of  $7,797.24,  making  a 
total  cost,  including  the  extension  on  35th  street,  of  $522,841.60, 
and  an  average  per  mile  of  $17,585.17. 

No  extensions  of  this  character  of  road  were  made  in  1894,  but 
during  the  following  three  years  a  total  of  111.93  miles  single  track 
trolley  road  were  built  at  an  expenditure  of  $2,335,341.44,  or  an 
average  of  $20,953.64  per  mile  of  single  track. 

As  before  stated,  this  average  is  misleading,  as  the  same  varia- 
tion in  cost  of  different  sections  of  road  composing  the  111.93  miles 
occur  as  in  the  foregoing  schedule.  This  variation  is  not  due  to 
any  economy  in  construction  of  roads  built  under  the  same  specifi- 


66  MUNICIPAL    AFFAIRS. 

cations,  but  to  difference  in  the  character  of  pavement,  weight  of 
rails  laid,  in  some  cases  to  the  absence  of  any  pavement  at  all  and  in 
others  to  the  relaying  of  the  old  pavement,  the  first  cost  of  which 
had  already  gone  into  construction  account.  Furthermore,  the 
first  trolley  poles  erected  were  wooden,  whereas  those  subsequently 
erected  were  made  of  iron,  which  improvement  with  others  in  the 
overhead  system  increased  the  cost  of  overhead  construction  ma- 
terially, as  will  be  seen  by  the  following  scredule,  viz.  : 

Line.                                                            Miles,  S.  T.  Overhead  Cost.  Cost  p.  Mile. 

47th  St  ..................................  11.55               $20,600.57  $1,783-60 

6i-63d  Sts  ...............................  12.533               38,638.56  3,082.95 

35th  St  ..................................    7-341               32,714.24  4,456.38 

29th  St  ...................................  170                   684.30  4,025.30 

Total  .................................  111.76  $616,175.66  $5,51540 

The  variation  in  cost  of  the  underground  work  was  naturally 
not  so  marked,  although  improvements  occurred  in  that  depart- 
ment, as  will  be  seen  by  the'  following  schedule  of  the  cost,  viz.  : 

Line.                                                            Miles,  S.  T.  Overhead  Cost.  Cost  p.  Mile. 

47th  St  ..................................  11.55               $15,414.42  $1,346.00 

6i-63d  Sts  ...............................  12.533               20,082.66  1,002.40 

35th  St  ..................................     7-341                8,178.56  1,114.09 

St  ...................................  170                   171.08  1,006.40 


Total  ................................  111.76             $198,905.68  $1,779.71 

The  cost  of  the  rails  laid  on  portions  of  the  road  was  double  that 

for  other  portions.     The  following  schedule  shows  the  weight  per 

yard  of  the  rails  laid,  the  mileage  and  the  cost,  viz.  : 

Weight  per  yd.                                              Miles,  S.  T.        Total  Cost.  Cost  p.  Mile, 

45   Ibs  ...............................     1.5                  $3,329.97  $2,219.98 

63   Ibs  ...............................  45407             141,123.59  3,107.97 

70  Ibs  ................................  302       1,042.90  3,453-30 

72  Ibs  ...............................  2.5        8,879.85  3,551.94 

83  Ibs  ...............................  74.978     306,937.40  4,094-62 

oo  Ibs  ...............................  17-667              78,440.60  4»439-95 

Total  ................................  142.354  $539,754-31 

The  cost  per  ton  taken  is  uniformly  $28.03,  tne  cost  °f  tne  most 
recent  purchases.  If  the  exact  cost  of  the  different  quantities  of  the 
same  weight  purchased  at  different  periods  were  taken  no  satisfac- 
tory comparison  could  be  made  of  the  total  cost  of  different  sections 
built  at  different  periods.  For  the  same  reason  the  following 
schedule  of  the  cost  of  the  street  paving  is  based  uniformly  upon  the 
average  cost  per  square  yard  of  the  different  kinds  of  pavement,  to- 
wit  :  Granite,  $2  ;  cedar  block,  $i  ;  macadam,  60  cents,  and  vitrified 
brick,  $1.60. 


CHICAGO   STREET   RAILWAYS.  67 

Pavement.                                                 Miles,  S.  T.  Total  Cost.  Cost  p.  Mile. 

Granite    78.985  $740,710.38  $9,986.66 

Wood    28.326  132,945.27  4,693.33 

Macadam  11.163  3M35-OI  2,816.00 

Brick    8.5  63,829.31  7,509.33 

Dirt   15.38  

Total 142.354  $968,919.97 

The  cost  of  the  miscellaneous  material  and  labor  entering  into 
the  total  cost  of  the  roadbed  was  as  follows : 

Line.                                                            Miles,  S.  T.  Total  Cost.  Cost  p.  Mile. 

47th  St 11.55  $58,783.55  $5,089.80 

6i-63d  Sts 11.533  39,001.54  3,382.60 

35th  St 7.341  I5,493.o6  2,110.50 

29th  St 0.170  105.60  621.18 

Miscellaneous   111.76  568,801.41  5,089.50 

Total 142,354  $682,185.16 

As  already  stated,  certain  sections  of  the  road  converted  from 
horse  to  electric  road  were  already  paved  with  granite  block,  which 
did  not  warrant  the  laying  of  new  pavement.  This  pavement  was 
therefore  relaid  when  the  change  was  made,  and  thus  its  first  cost 
necessarily  became  incorporated  into  the  cost  value  of  the  new  road. 
The  original  cost  was  $284,242.13,  which,  if  added  to  the  actual  ex- 
penditures between  1892  and  1897  inclusive,  to-wit:  $2,858,183.04, 
make  the  total  cost  value  of  the  142.354  miles  single  track  electric 
road  $3,142,425.17,  divided  as  follows: 

Line.                                                         Miles,  S.  T.  Total  Cost.  Avg.p.  Mile. 

47th  St 11.55  $213,957.94  $18,524.50 

6i-63d  Sts 11-533  209,851.69  11,195.76 

35th  St 7.341  136,578.63  18,604.91 

29th  St 0.122  3,252.80  19,134.12 

Miscellaneous  111.76  2,578,784.11  23,074.30 

Total 142.354        $3,142,425-17 

The  total  cost  of  the  electric  portion  of  the  road  was  as  follows : 

Line.  Miles,  S.  T. 

47th  St H.55  $36,014.99  $3,118.18 

6i-63d  Sts I2.5331  58,721.22  4,685.33 

35th  St 7-341  40,892.80  5,570-47 

29th  St 0.170  855.38  5,031.65 

Miscellaneous  111.76 


Total 143-354  $951,56573 

*It  will  be  noticed  that  the  mileage  on  6i-63d  Sts.  in  the  last  schedule  is  one 
mile  greater  than  in  the  previous  ones.  This  is  on  account  of  the  fact  that  the 
trolley  wires  on  Cottage  Grove  avenue  from  6ist  to  63d  street  are  built  over  the 
cable  track,  the  cost  of  which  is  included  m  the  cable  system.  The  case  is  the  same 
on  State  street  from  6ist  street  to  6ist  street  viaduct.  The  roadbed  on  Went  worth 
avenue  from  the  6ist  street  viaduct  to  63d  street  is  also  included  in  the  general  cost 
of  the  entire  road  on  Wentworth  avenue. 


68  MUNICIPAL    AFFAIRS. 

Independent  of  the  electric  portion  of  the  road,  the  actual  cost 
of  the  roadbed  was  as  follows : 

Line.                                                            Miles,  S.  T.  Total  Cost  Avg.  p.  Mile. 

47th  St.   11.55  $177,942.95  $15,406.32 

6i-63d  Sts H.533  151,130.47  13,105.05 

35th  St 7.341  95,685-83  13,034-44 

29th  St 0.170  2,397.42  14,102.47 

Miscellaneous    111.76  1,763,702.77  15,781.17 

Total 142,354        $2,190,859-44 

The  total  cost  of  the  roadbed  is  subdivided  as  follows : 

Miles,  S.  T.        Material  and  Labor.                                          Total  Cost.  Av.  p.  Mile. 

142.354          Steel  rails $539,754-31  $3791-64 

142.354          Pavement 968,919.97  6,806.40 

142.354         Miscellaneous  matter  and  labor 682,185.16  4,792.20 

Total $2,190,859.44 

The  total  cost  of  the  electric  portion  is  subdivided  as  follows : 
Miles,  S.T.         What  for.  Total  Cost   Avg.  p.  Mile. 

143,354        Overhead  $708,813.33  $4,944-50 

143,354       Underground    242,752.40  1,693.40 

Total $951,56573 

Referring  to  the  first  schedule,  it  will  be  noticed  that  the  sec- 
tions of  road  on  47th  street  from  Leavitt  to  Paulina ;  on  63d  street 
from  Cottage  Grove  avenue  to  Stony  Island  avenue  and  from  Went- 
worth  avenue  to  Center  avenue  and  on  35th  street  from  State  street 
to  Ullman  street,  an  aggregate  of  8.928  miles  out  of  the  total  30.261 
miles  single  track  electric  road  built  in  1892-93,  cost  about  the  same 
per  mile  to  build.  Each  of  these  sections  was  built  after  the  same 
specifications.  Each  is  paved  with  granite  block  and  each  of  the 
rails  weigh  83  pounds  to  the  yard.  The  other  items  of  cost  like- 
wise correspond.  As  nearly  56  per  cent,  of  the  total  electric  mile- 
age is  composed  of  road  of  this  character,  its  actual  cost  would 
seem  to  afford  a  better  basis  for  computations  than  the  general 
average  of  roads  of  irregular  description. 

The  sections  referred  to  cost  $21,298.36  per  mile  single  track, 
divided  as  follows : 

Pavhig $9,386.66 

Rails   4,09462 

Miscellaneous  material  and  labor 3,036.09 

Total  cost  for  roadbed $16,517.37 

Electric  construction 4,780.99 

Total $21,298.36 

The  items  of  paving  and  electrical  construction  include  the  cost  of  labor.  The 
labor  of  laying  the  rails  is  included  in  the  items  of  miscellaneous  material  and  labor. 


CHICAGO   STREET   RAILWAYS.  69 

During  1895-6-7  thirty-four  and  a  half  miles  single  track  road  of 
precisely  similar  description  was  built,  at  an  average  cost,  however, 
of  $25,863.89  per  mile,  divided  as  follows : 

Paving $9,386.66 

Rails    4,094.62 

Miscellaneous  material  and  labor 5,089.50 

Total  for  roadbed $18,570.78 

Electrical  construction 7,293.11 

Total $25,863.89 

The  engineers  of  the  company  estimate  that  the  same  road  can 

be  built  to-day  for  $18,077.85  per  mile  single  track,  divided  as 

follows : 

Paving    $9,386.66 

Rails 4,094.62 

Miscellaneous  material  and  labor 2,680.21 

Total  for  roadbed $16,161.49 

Overhead   material 1,270.41 

Overhead  labor 170.34 

Underground  material 370.80 

Underground  labor 104.81 

Total $18,077.85 

Sec.  6.— Present  Assets  and  Liabilities. 

The  cost  value  of  the  existing  cable,  electric  and  horse  railroad 
of  the  company  on  December  31,  1897,  is  as  follows: 

35.166  miles  S.  T.  cable  road  at  $74,113.64 $2,606,280.24 

142.354  miles  S.  T.  electric  road  at  $22,074.72 3,142,425.17 

.256  miles  S.  T.  horse  road  at  $22,946.14 5,873.31 

2.818  miles  S.  T.  horse  road  at  $24,995.73 70,427.96 

2.        miles  S.  T.  horse  road  at  $14,720.08 29,440.16 


182.594  miles $5,854,446.84 

To  this  should  be  added  the  cost  value  of  road  leased  to  other  companies  170,000.00 
Also  amount  paid  to  the  111.  Cent.  R.  R.  Co.  for  proportionate  cost  of 

raising  tracks  and  building  subway  at  63d  St.  and  111.  Cent.  R.  R. 

right  of  way 60,590.92 

Total $6,085,037.76 

Deducting  this  total  from  the  balance  carried  on  the  books  of 
the  company  to  the  debit  of  construction  account,  shows  a  depre- 
ciation of  $4,811,565.05  carried  in  that  account  properly  ehargeable 
to  profit  and  loss. 


70  MUNICIPAL    AFFAIRS. 

The  real  estate  or  land  owned  by  the  company  on  December  31, 
1880,  just  before  the  introduction  of  the  cable  system,  cost 
$234,423.63. 

Between  that  date  and  December  31,  1885,  during  which  period 
the  first  two  sections  of  cable  road  north  of  39th  street  were  built, 
and  just  before  the  extension  of  those  lines  south  of  39th  street, 
there  was  expended  for  land  $40,500.10,  and  between  December 
31,  1885,  and  December  31,  1892,  or  the  year  prior  to  the  operation 
of  the  lines,  there  was  expended  $160,387.67  for  additional  land, 
part  for  the  enlargement  of  car  barns,  shops,  etc.,  due  to  the  in- 
creased traffic  arising  from  the  extension  of  the  cable  lines  and 
partly  for  land  upon  which  to  erect  two  new  cable  power  houses  for 
the  new  extensions. 

Between  December  31,  1892,  and  December  31,  1897,  $49,- 
584.39  was  paid  out  for  additional  land,  principally  for  a  site  for  the 
new  electric  power  houses  at  Oakley  avenue  and  Leavitt  street,  be- 
tween 48th  and  49th  streets,  and  on  State  street  and  52d  street. 

The  buildings  owned  by  the  company  on  December  31,  1880, 
cost  $202,472.75.  Directly  and  indirectly  the  construction  of  the 
first  two  sections  of  cable  road  north  of  39th  street  occasioned  a 
further  expenditure  of  $167,568.83  for  improvements  of  this  char- 
acter. Between  December  31,  1885,  and  December  31,  1892,  $761,- 
53J-33  was  paid  out  for  extensive  improvements  in  the  buildings  of 
the  company  generally  and  particularly  for  the  erection  of  two  new 
cable  power  houses  for  the  extensions  south  of  39th  street. 

The  introduction  of  the  trolley  system  in  1893  necessitated  the 
construction  of  the  two  new  electric  power  houses  already  referred 
to  at  a  joint  cost  of  $241,356.09,  exclusive  of  machinery.  Miscel- 
laneous improvements  costing  $135,537.71  were  also  made  in  other 
buildings  prior  to  December  31,  1897. 

The  cable  machinery  for  the  first  two  sections  of  road  north  of 
39th  street  cost  $137,925.47  up  to  December  31,  1885,  and  together 
with  the  extensions  south  of  39th  street  $460,984.32  additional  by 
December  31,  1892,  making  a  total  of  $598,909.79  for  cable  ma- 
chinery. For  the  five  years  succeeding  December  31,  1892,  $23,- 
394.11  in  improvements  were  made  to  the  machinery. 

The  total  cost  of  electrical  machinery  up  to  December  31,  1897, 
was  $586,549.31. 


CHICAGO    STREET    RAILWAYS.  71 

The  two  electric  power  houses,  including  machinery,  but  ex- 
cluding land,  cost  $827,905.40,  divided  as  follows :  Oakley  avenue, 
$392,462.99;  52d  street  and  State  street,  $435,442.41. 

The  total  cost  value  of  all  the  property  of  the  company  on  De- 
cember 31,  1897,  is  shown  by  the  following  statement: 

ASSETS. 

Cable  road $2,606,280.24 

Electric   road 3,142,425.17 

Horse  road 105,741.43 

Leased  road 170,000.00 

111.  Cent.  R.  R.  construction 60,590.92 

$6,085,037.76 

Real  Estate— Land   $484,895.79 

Buildings  1,508,466.71 

1,993,362.50 

Machinery— Cable   $622,303.90 

Electric 586,549.31 

1,208,853.21 

Cable  38,744-46 

Tools,  etc 33,126.00 

Office  furniture  and  fixtures 9,247.01 

Storehouse  supplies 110,929.99 

Uniforms  570.00 

Auditorium  stock  (estimated  value) 2,500.00 

Chicago  Exhibition  Co.  bonds 10,000.00 

Accounts  receivable 16,268.20 

Rolling  Stock : 

339  Box  Cars,  at  $900 $305,100.00  ,  , 

59  Box  Cars,  at  $725 » 42,775.00 

6  Box  Cars,  at  $650 3,900.00 

417  Open  Cars,  at  $725 302,325.00 

259  Grip  Cars,  at  $650 168,350.00 

390  Box  Cars,  motors,  at  $1,000 390,000 

340  Open  Cars,  motors,  at  $825 280,500.00 

2  Mail  Cars,  at  $900 1,800.00 

2  Sweepers,  at  $750 1,500.00 

6  Sweepers,  at  $500 3,000.00 

5  Sweepers,  at  $300 1,500.00 

i  Sweeper,  at  $400 400.00 

61  Snow  plows 20,781.60 

$1,521,931-60 

Grips    25,031.84 

Horses  8,270.00 

Cash  on  hand  and  in  bank 540,088.14 

Total   assets $i  1,603,960.71 

LIABILITIES. 

Capital   stock $12,000,000.00 

Bonds 4,619,500.00 

Unpaid   coupons 9,580.50 

Unpaid  wages 72,402.15 


72  MUNICIPAL    AFFAIRS. 

Unpaid  bills   (audited) 73,599-42 

Deposits  11,855.00 

Accounts  payable *    65,051.15 

—$16,851,988.22 


Deficit $5,248,027.51 

Sec.  7.— Stocks,  Bonds  and  Dividends. 

The  authorized  capital  stock  of  this  company  outstanding  Janu- 
ary i,  1881,  was  $1,500,000,  and  for  several  years  prior  to  that  date 
it  had  remained  at  the  same  figure.  With  the  advent  of  the  cable 
system,  accompanied  by  a  large  increase  in  traffic  and  net  earnings, 
came  a  series  of  enlargements  of  capital  in  the  form  of  both  stock 
and  bonds. 

The  first  issue  of  bonds,  in  reality  certificates  of  indebtedness, 
occurred  in  1881,  simultaneously  with  the  construction  section  of 
cable  road  built  on  State  street.  The  amount  of  this  issue  was 
$750,000,  of  which  $738,600  were  sold  the  same  year  and  the  bal- 
ance in  subsequent  years. 

On  July  i,  1882,  the  capital  stock  was  increased  to  $2,500,000, 
and  on  December  i  the  same  year  the  bonds  authorized  were  also 
increased  to  $1,500,000.  Reference  is  made,  in  the  annual  report 
to  the  stockholders,  to  the  new  issue  of  bonds  as  follows :  "Five 
hundred  thousand  dollars  of  these  bonds  were  issued  to  the  stock- 
holders at  par  and  the  money  used  in  paying  a  dividend  of  20  per 
cent  to  the  stockholders."  In  other  words,  the  bonds  themselves 
were  practically  given  to  the  stockholders,  the  transaction  being 
essentially  a  "bond"  dividend  as  distinguished  from  the  common 
"stock"  dividend.  The  20  per  cent,  bond  dividend  was  also  on  the 
full  $2,500,000  capital  stock.  Considering  that  the  new  investment 
of  $1,000,000  had  only  been  in  six  months  the  return  was  at  the  rate 
of  50  per  cent,  per  annum. 

Prior  to  the  increase  in  the  stock,  two  quarterly  dividends  of 
2^  per  cent,  each  had  been  paid  that  year  and  two  more  of  the  same 
rate  were  subsequently  paid  on  the  increased  sum. 

But  this  did  not  constitute  the  only  profit  derived  by  the  in- 
vestor. As  the  new  stock  was  sold  only  to  the  old  stockholders  at  par 
and  had  a  market  value  of  $300  immediately  after  its  issue,  the  con- 
ditions under  which  it  was  sold  amounted  to  the  payment  of  a  bonus 
of  200  per  cent.,  or  an  extra  dividend  of  133  1-3  per  cent  on  the 
original  $1,500,000  of  capital. 


CHICAGO   STREET    RAILWAYS.  73 

As  regards  the  bond  dividend,  nothing  in  the  financial  condition 
of  the  company  at  the  time,  or  in  its  previous  history  as  regards 
dividends  and  earnings,  warranted  the  payment  of  so  large  a  divi- 
dend. For  five  years  previous  to  1881  the  dividend  rate  had  been 
uniformly  10  per  cent,  and  for  1881  it  was  only  i  per  cent,  higher. 
Furthermore,  the  net  earnings  for  1882  were  $364,992.32.  Deduct- 
ing the  regular  quarterly  dividends  of  1882,  aggregating  $190,- 
747.50,  leaves  only  $174,244.82  applicable  to  the  $500,000  extra 
dividend,  showing  that  the  balance  was  apparently  from  the  ac- 
cumulation of  previous  years.  But  it  has  already  been  pointed  out 
that  the  surplus  account,  according  to  the  books,  on  December  31, 
1880,  was  $655,646.84  in  excess  of  what  it  should  be,  and  if  to  this 
is  added  $355,098.08,  the  cost  value  of  the  17.434  miles  of  old  horse 
railroad  just  replaced  by  cable  road,  the  total  sum  charged  to  de- 
preciation would  be  $1,010,744.92,  which  would  wipe  out  the  $816,- 
897.85  book  surplus  of  December  31,  1881,  and  $193,847.07  of  the 
$364,992.32  surplus  earnings  for  1882. 

The  correct  surplus  remaining  after  this  adjustment  of  the  ac- 
counts would  have  been  sufficient  to  pay  an  average  dividend  of 
nearly  9  per  cent,  for  the  year,  so  that  if  the  proper  sum  chargeable 
to  depreciation  had  been  marked  off  even  as  late  as  December  31, 
1882,  it  would  have  had  no  material  effect  on  the  rate  of  dividends 
that  had  been  uniformly  paid  each  year,  and  which  apparently  gave 
the  stock  a  market  value  of  $300  per  share  before  any  series  of 
bonus  distributions  had  been  introduced. 

Reference  has  been  made  on  a  preceding  page  to  the  fact  that 
the  management  had  to  overcome  serious  opposition  on  the  part  of 
the  general  public  to  the  introduction  of  the  cable  system,  and  it 
suggests  at  once  the  possibility  of  its  being  obliged  to  overcome 
greater  opposition  among  those  more  directly  interested  by  the 
distribution  of  the  extra  20  per  cent,  dividend  of  $500,000,  and  as 
the  current  earnings  did  not  warrant  it  a  bond  issued  was  decided 
upon  for  the  purpose. 

On  April  10,  1883,  the  capital  stock  was  again  increased  $500,- 
ooo,  or  to  a  total  of  $3,000,000.  As  in  the  case  of  the  previous 
issue,  the  new  stock  was  sold  to  the  old  stockholders  only,  and  at 
par,  although  the  market  value  of  the  general  stock  was  $300  per 
thare  before  the  increase  and  $270  afterward.  The  bonus  in  this 


74  MUNICIPAL   AFFAIRS. 

case  was  170  per  cent,  on  the  par  value  of  the  new  stock,  equivalent 
to  an  extra  dividend  of  34  per  cent,  to  the  old  stockholders  on  their 
holdings  prior  to  the  increase. 

The  regular  quarterly  dividends  this  year  aggregated  n  per 
cent.,  and  from  that  time  down  to  the  present  have  been  12  per 
cent,  per  annum. 

In  1885  another  issue  of  bonds,  amounting  to  $1,000,000,  was 
authorized.  These  bonds,  like  those  issued  previously,  mature 
July  i,  1901,  and  bear  4.4  per  cent,  interest. 

In  the  annual  report  to  the  stockholders  at  the  meeting  in  Janu- 
ary, 1886,  reference  is  made  to  the  new  stock  and  bonds  issued  since 
1880,  as  follows: 

"Five  years  ago  the  capital  stock  of  the  company  consisted  of  $1,500,000.00  and 
was  selling  at  something  over  $300  per  share.  Since  that  time  the  company  has 
grappled  with  and  carried  through  the  most  gigantic  enterprise  ever  undertaken 
by  any  street  railway  corporation  in  the  world.  It  has  issued  and  sold  an  additional 
million  and  a  half  stock  at  par  and  two  and  a  half  millions  of  bonds,  the  proceeds 
of  which  have  been  expended  in  a  radical  revolution  of  its  system."  *  *  * 

During  the  same  year  $1,500,000  new  bonds  were  authorized 
and  sold  to  provide  funds  to  extend  the  cable  roads  south  of  39th 
street,  making  total  bonds  outstanding  $4,000,000  and  capital  stock 
$3,000,000.  This  year  it  was  decided  that  the  bonds  should  have 
something  more  substantial  than  the  mere  promise  of  the  company 
to  pay  as  security,  and  accordingly  a  mortgage  or  first  lien  on  all 
the  property  of  the  company  was  created  and  pledged  as  security 
for  the  payment  of  the  $4,000,000,  principal  and  interest,  the  right 
being  reserved  to  increase  the  total  bonds  to  $6,000,000. 

The  following  excerpt  from  the  annual  report  to  the  stockhold- 
ers in  January,  1887,  is  interesting  as  showing  that  it  was  well 
understood  that  the  property  account  of  the  property  as  it  appeared 
on  the  books  was  inflated,  to-wit : 

"At  the  beginning  of  the  year  the  books  of  the  company  showed  a  surplus  of 
$628,559.40  which  has  been  accumulated  for  a  number  of  years,  and  which,  under 
ordinary  circumstances,  the  shareholders  would  be  entitled  to  have  represented  by 
bonds  or  stock  and  divided  pro  rata,  according  to  the  amount  of  stock  held  by  each. 

"But  when  the  change  was  made  from  horse  to  cable  power,  it  became  necessary 
to  dispense  with  a  large  amount  of  old  construction,  which  was  contained  in  the 
property  account  of  the  company,  and  the  doing  away  with  that  construction  would 
necessarily  affect  the  amount  of  the  so-called  surplus.  The  only  legal  manner  of 
determining  how  much,  if  any,  of  that  surplus  remained,  would  be  by  an  appraise- 
ment made  by  duly  appointed  commissioners,  under  order  of  court,  with  returns 
made  into  court.  Undoubtedly  the  amount  of  such  appraisement,  if  now  made,  based 


CHICAGO   STREET   RAILWAYS.  75 

as  it  should  be,  upon  the  earning  capacity  of  the  road,  would  exceed  by  several 
millions  of  dollars  the  liabilties  of  the  company,  as  represented  by  its  capital  stock 
and  bonds.  There  are,  however,  many  weighty  reasons  why  no  such  appraisement 
should  be  made  at  the  present  time,  however  desirable  such  a  proceeding  might  be, 
when  matters  of  taxation  and  other  relations  of  corporate  properties  are  more  per- 
manently settled  by  legislation."  *  *  * 

The  report  then  goes  on  to  describe  a  plan  by  which  the  same 
desired  result  may  be  attained  without  a  reappraisement,  as  follows : 

"In  other  words,  an  amount  equal  to  the  surplus  in  '86  has  been  borrowed  at  5 
per  cent,  to  pay  for  property,  and  the  surplus  itself  has  been  loaned  to  the  same 
creditor  at  the  same  rate  of  interest.  Hence,  whenever  it  shall  be  for  the  interest 
of  the  company  to  pay  such  loan  by  an  issue  of  stock  or  bonds,  that  amount  will  be 
available  for  dividends  without  any  appraisement  or  court  proceedings." 

In  plain  words,  by  creating-  a  fictitious  liability  an  excuse  is  af- 
forded for  issuing  new  bonds  or  stock  to  take  it  up,  but  instead  of 
applying  the  proceeds  of  the  bonds  or  stock  in  that  manner  they  are 
diverted  toward  the  payment  of  dividends  and  the  original  condition 
of  affairs  restored.  This  proposition  is  so  bald  on  the  face  of  it  as  to 
scarcely  require  comment.  It  is  chiefly  remarkable  as  showing  the 
frankness  with  which  the  exact  situation  is  explained  to  the  share- 
holders and  their  apparent  ready  acquiescence  in  the  scheme  pro- 
posed, as  I  find  no  record  of  any  protest  from  that  quarter ;  on  the 
contrary,  it  has  been  the  practice  uniformly  at  each  annual  meeting 
of  the  shareholders  to  ratify,  confirm  and  approve  by  specific  reso- 
lution all  the  acts  and  doings  of  the  management  during  the  pre- 
ceding year,  so  that  there  would  seem  to  be  no  division  of  responsi- 
bility between  the  management  and  the  stockholders  either  on  this 
or  any  other  account.  Indeed,  it  would  be  most  remarkable  if  any 
record  could  be  found  of  opposition  on  the  part  of  the  shareholders 
to  any  plan  of  increasing  the  dividends  whenever  proposed  by  the 
management,  however  ill  concealed  the  pretext  may  be,  as  long  as 
any  degree  of  plausibility  can  be  found  to  support  it.  It  is  proper 
to  state  that  the  above  proposition  originated  with  a  former  man- 
agement and  it  may  be  the  ready  disposition  to  thus  openly  juggle 
with  the  surplus  had  some  bearing  on  the  subsequent  change  in 
management,  but  if  such  is  the  fact  there  is  nothing  of  record  to 
indicate  it;  furthermore,  no  apparent  effort  has  ever  been  made  by 
subsequent  managements  to  correct  the  property  account  in  the 
books  or  determine  the  actual  surplus  of  the  company,  the  first  step 
toward  which  would  be  the  marking  off  of  the  cost  value  of  the  old 


76  MUNICIPAL   AFFAIRS. 

horse  railroad,  scarcely  a  vestige  of  which,  in  any  tangible  form, 
can  now  be  found,  and  to  that  extent  the  present  management  is 
equally  responsible  for  the  payment  of  dividends  from  the,  as  ex- 
President  Holmes  rather  contemptuously  refers  to  it,  "so-called" 
surplus  which  has  been  carried  on  the  books  as  an  asset  down  to 
the  present  time. 

On  April  i,  1888,  another  increase  of  $1,000,000  in  the  capital 
stock  occurred.  As  in  previous  cases,  the  new  stock  was  sold  to  old 
stockholders  only  and  at  par,  each  stockholder  being  privileged  to 
purchase  such  amount  as  was  indicated  by  his  pro  rata  share  of  the 
whole  stock  outstanding  previous  to  April  i,  1888.  N  Just  previous  to 
April  i,  1888,  the  market  value  of  the  $3,000,000  stock  then  outstand- 
ing was  $350  per  share,  or  $10,500,000  in  the  aggregate.  The  in- 
crease of  $1,000,000  reduced  the  pro  rata  mathematical  value  of  each 
share  to  $263,  and  as  a  matter  of  fact  the  market  quotations  within 
a  week  after  April  i,  1888,  were  $260  per  share  for  the  new  stock, 
or  a  premium  of  $160  over  the  price  paid  for  it  by  the  old  share- 
holders. 

It  would  be  impracticable  to  show  whether  or  not  any  of  the 
shareholders  disposed  of  the  new  stock  and  thus  realized  the  profit 
pointed  out,  but  even  if  they  did  not  and  still  held  it  at  the  date  at 
which  this  examination  is  brought  down,  to-wit,  December  31, 
1897,  the  market  price  at  which  the  stock  could  then  be  disposed  of 
was  $235  per  share,  or  a  fraction  off. 

I  understand  that  the  privilege  of  purchasing  these  new  issues  of 
stock  at  par  has  rarely,  if  ever,  been  allowed  to  lapse  by  the  old 
shareholders,  and  it  would  be  surprising  if  the  opportunity  was  al- 
lowed to  pass,  since  the  stock  has  always  been  good  collateral  for 
loans,  and  a  stockholder,  even  if  indisposed  to  increase  his  invest- 
ment, could  easily  secure  a  temporary  loan  of  $100  per  share,  on 
the  security  of  his  old  stock,  with  which  to  purchase  the  new  shares, 
and  after  receiving  the  certificate  dispose  of  it  for  cash  at  its  en- 
hanced market  value,  take  up  his  loan  of  $100,  and  pocket  the  pre- 
mium of  $160  pointed  out  in  the  above  case.  In  such  a  case  the 
premium  or  bonus  received  is  clearly  equivalent  to  an  extra  divi- 
dend of  53  1-3  per  cent,  on  the  old  stock. 

On  October  i,  1889,  still  another  increase  of  $1,000,000  in  the 
capital  stock  occurred  under  similar  conditions.  This  new  issue 


CHICAGO    STREET    RAILWAYS.  77 

was  sold  to  stockholders  of  record  September  15,  1889.  The  mar- 
ket price  immediately  after  was  $257  per  share,  the  bonus  $157  per 
share,  or  39^  per  cent,  on  the  whole  stock. 

During  1890  $500,000  new  4/J  per  cent,  bonds  were  issued,  pre- 
sumably on  account  of  the  Alley  "L"  road. 

On  January  2,  1891,  $2,000,000  new  stock  was  authorized  sold  to 
stockholders  of  record  December  15,  1890,  at  par.  The  bonus  in 
this  case  was  $165  per  share,  equivalent  to  an  extra  dividend  of 
66  2-3  per  cent,  on  the  old  stock.  The  same  year  $120,000  new  4^ 
per  cent,  bonds  were  issued,  making  a  total  of  $4,620,000.  The 
amount  outstanding  on  January  i,  1898,  was  $4,619,500. 

On  April  I,  1893,  $2,000,000  new  stock  was  sold  at  par  to  stock- 
holders of  record  March  15,  1893.  Before  March  15,  1893,  the 
market  price  was  $440  per  share  and  after  March  15,  1893,  $360 
per  share.  The  bonus  in  this  case  aggregated  $5,200,000,  or  74.29 
per  cent,  on  the  $7,000,000  capital  then  outstanding. 

This  was  not  the  only  profit  that  year.  In  addition  to  the  above, 
the  ordinary  dividends  amounted  to  $2,100,000.  The  $3,000,000 
Alley  "L"  road  extension  bonds,  costing  $2,250,000,  were  also  dis- 
tributed pro  rata,  as  well  as  the  $3,885,000  capital  stock  of  the  Alley 
"L"  road,  making  a  total  of  $13,435,000,  reckoning  the  extension 
bonds  at  cost  value,  or  an  average  profit  of  nearly  150  per  cent,  on 
the  entire  $9,000,000  capital  stock  in  one  year. 

On  July  i,  1895,  another  increase  of  $1,000,000  in  the  capital 
stock  occurred,  the  new  stock  being  sold  to  stockholders  of  record 
of  June  15,  1895,  at  par.  The  bonus  in  this  case  was  $185  per  share, 
or  an  extra  dividend  of  20.55  Per  cent,  on  the  old  stock. 

Still  another  increase  of  $2,000,000  in  the  capital  stock  occurred 
in  1896,  the  new  stock  being  sold  to  stockholders  of  record  June  15, 
1896,  the  bonus  being  $122  per  share,  equivalent  to  an  extra  divi- 
dend of  24.4  per  cent,  on  the  old  stock. 

In  the  sixteen  years  from  January  i,  1882,  to  January  i,  1898, 
the  total  dividends  paid  by  the  company,  including  the  premiums 
on  new  stock  issued,  aggregate  the  enormous  sum  of  $37,602,187.50, 
or  an  average  of  44.63  per  cent,  per  annum. 

Of  this  sum,  $12,657,187.50  represents  the  regular  annual 
dividends  of  10  per  cent,  in  1882,  and  12  per  cent,  each  year  since, 
also  the  extra  20  per  cent,  bond  dividend  of  1882,  and  double  cash 


78  MUNICIPAL   AFFAIRS. 

dividend  of  1893.  The  stock  bonuses  represent  $18,810.00  and  the 
Alley  "L"  road  bonds  and  stock  $2,250,000  investment.  The  extra 
dividend  of  1882  amounted  to  $500,000  and  that  of  1893  to  $870,000. 

The  aggregate  of  the  three  last  named  dividends  is  $3,620,000. 
Even  if  these  had  not  been  paid  there  is  still  a  deficiency  of  $1,628,- 
ooo,  which  should  have  been  withheld  from  the  stockholders  in  the 
regular  quarterly  dividends  in  order  that  the  proper  adjustment  in 
the  permanent  property  account  of  the  company  might  be  made 
without  showing  a  deficit  in  the  balance  sheet  of  the  company  on 
December  31,  1897. 

During  the  same  period  the  capital  stock  has  been  increased 
$10,500,000  and  bonds  issued  amounting  to  $4,619,500,  a  total  in- 
crease in  the  permanent  indebtedness  of  the  company  of  $15,119,- 
500.  The  increase  in  the  book  value  of  the  assets  has  more  than 
kept  pace,  but  included  in  the  stock  value  is  $5,248,027.51  properly 
chargeable  to  depreciation,  as  already  set  forth  on  a  preceding  page. 

The  permanent  debt  of  the  company  on  December  31,  1897,  ex- 
clusive of  capital  stock,  was  $4,619,500  and  the  floating  debt  $232,- 
488.22,  making  a  total  of  $4,851,988.22.  Deducting  this  from  the 
total  assets,  $11,603,960.71,  leaves  $6,751,972.49  to  represent  the 
capital  stock  of  $12,000,000,  showing  a  deficit  of  $5,248,027.51. 
Sec.  8.— Mileage  of  South  Side  Lines. 

CONSTRUCTION. 

Miles, 
S.T. 

Horse  road  existing  December  31,  1880 45.679 

New  horse  road  built  since  December  31,  1880 104.545 

New  cable  road  built  since  December  31,  1880 8.481 

New  electric  road  built  since  December  31,  1880 29.031 

Total 187.736 

Deduct— Horse  road  torn  up 1.901 

Horse  road  transferred 3.241 

5-142 

Total  mileage  December  31,  1897 182.594 

RECONSTRUCTION. 

Miles, 

S.T. 

Horse  road  existing  December  31,  1880,  afterward  converted  to  cable  road. ..  20.815 

Ditto,  electric  road 23.221 

New  horse  road  built  since  December  31,  1880,  afterward  converted  to  cable 

road  5.870 


CHICAGO   STREET   RAILWAYS.  79 

Add — Horse  road  built  prior  to  December  31,  1880,  unchanged 256 

Horse  road  built  since  December  31,  1880,  unchanged 4.818 

Cable  road  built  since  December  31,  1880  (new  mileage) 8.481 

Electric  road  built  since  December  31,  1880  (new  mileage) 39.031 

Total  mileage  December  31, 1880 182.594 

From  point  of  view  of  motive  power,  the  mileage  is  as  follows : 

Cable  road 3S-i66  miles,  S.  T. 

Electric  road 142.354  miles,  S.  T. 

Horse  road 5.074  miles,  S.  T. 

Total 182.594  miles,  S.  T. 

Sec.  9.— Relations  with  the  Elevated  Roads. 

It  has  apparently  been  the  uniform  policy  of  the  three  principal 
street  railway  companies  in  Chicago  to  pre-empt  the  territory  in 
which  they  operate  respectively,  to  their  sole  use,  and  a  mutual 
understanding  has  been  had  that  each  company  should  confine  its 
lines  to  its  own  particular  territory.  So  far  as  the  establishment  of 
new  competing  lines  is  concerned,  the  geographical  formation  of 
the  city  and  its  division  into  three  distinct  sections,  bounded  by  the 
Chicago  river  and  its  two  branches,  seems  to  aid  in  this  monopoly, 
as  practically  all  the  bridges  and  tunnels  connecting  the  three  sec- 
tions referred  to,  the  only  avenues  of  traffic  between  them,  are  ab- 
solutely in  the  control  of  either  of  the  companies  for  street  railway 
purposes. 

In  a  report  made  to  the  Fidelity  Insurance  Trust  and  Safe  De- 
posit Co.,  of  Philadelphia,  in  1888,  by  special  examiners  who  came 
to  Chicago  for  the  purpose  of  examining  the  street  railway  prop- 
erties of  the  city,  especially  those  of  the  North  and  West  sides,  par- 
ticular attention  is  called  to  these  natural  obstacles,  as  it  were,  to  the 
establishment  of  rival  lines,  owing  to  the  inability  of  new  roads  to 
reach  the  business  portion  of  the  city  otherwise  than  by  means  of 
the  bridges  and  tunnels  referred  to,  and  speaks  of  the  wisdom 
shown  by  the  management  of  the  companies  in  bringing  about  a 
contract  with  the  city  to  repair  and  maintain  in  good  order  the  old 
city  tunnels  and  bridges,  going  so  far  as  to  move  certain  bridges  and 
build  entirely  new  ones  free  from  all  expense  to  the  city,  at  the 
only  remaining  accessible  points  of  communication  across  the  river, 
in  return  for  the  exclusive  privilege  of  operating  street  cars  across 
them,  as  calculated  to  free  the  companies  from  any  possibility  of 


80  MUNICIPAL   AFFAIRS. 

competition  and  inspire  confidence  in  the  permanent  value  of  the 
securities  of  the  companies. 

On  the  South  Side  the  situation  is  practically  the  same,  all  the 
main  thoroughfares  into  the  heart  of  the  business  district  being  in 
the  exclusive  control  of  the  Chicago  City  Railway  Company,  so  far 
as  street  railway  transportation  is  concerned.  Under  these  cir- 
cumstances, the  only  means  of  breaking  the  monopoly  was  in  the 
construction  of  an  elevated  railroad  over  private  property. 

On  March  10,  1888,  Col.  A.  F.  Walcott,  of  New  York,  suc- 
ceeded in  securing  a  contract  for  the  construction  of  an  elevated 
road  parallel  to  the  two  main  lines  of  the  Chicago  City  Railway  Co., 
thus  threatening  the  latter  company  with  what  appeared  to  be  se- 
rious competition  at  the  time.  On  March  28  of  the  same  year  the 
city  council  granted  permission  for  the  construction  of  the  road 
from  Van  Buren  St.  to  39th  St.,  on  property  to  be  purchased  or 
condemned,  adjoining  the  alley  between  State  St.  and  Wabash  Ave. 
Subsequently  permission  to  extend  the  road  south  to  67th  St.  was 
granted. 

The  corporate  title  of  the  new  company  was  the  Chicago  and 
South  Side  Rapid  Transit  Railroad  Co.,  and  the  date  of  incorpora- 
tion January  4,  1888.  The  contract  for  the  construction  of  the 
road  secured  by  Col.  Walcott  March  loth,  1888,  was  transferred  by 
him  May  i,  1888,  to  the  Rapid  Transit  and  Bridge  Construction 
Company  of  New  Jersey,  organized  for  that  purpose. 

The  immense  outlay  required  for  the  purchase  and  condemna- 
tion of  land  had  a  tendency  to  greatly  discourage  the  enterprise  in 
its  incipiency,  and  the  great  uncertainty  of  its  ultimate  completion 
apparently  occasioned  very  little  apprehension  on  the  part  of  the 
Chicago  City  Railway  Company  officials  that  the  new  road  would 
ever  materialize  until  after  one  mile  of  single  track  road  of  this  de- 
scription had  actually  been  completed  early  in  1889,  from  3Oth  to 
35th  streets,  adjoining  the  alley  running  parallel  to  and  between 
State  street  and  Wabash  avenue. 

About  this  time  some  of  the  directors  and  principal  stockholders 
of  the  Chicago  City  Railway  Co.  became  satisfied  that  if  the  World's 
Fair  of  1893  was  definitely  located  at  Jackson  Park  sufficient  funds 
would  be  forthcoming  to  complete  the  road  to  that  point  as  pro- 
jected. Accordingly  steps  were  taken  to  secure  control,  and  by 


CHICAGO    STREET    RAILWAYS.  81 

November  26,  1889,  an  agreement,  amended  December  10,  1889, 
was  entered  into  between  the  Chicago  City  Ry.  Co.  and  the  Rapid 
Transit  and  Bridge  Construction  Co.,  by  virtue  of  which  the  for- 
mer was  not  only  to  cease  all  further  opposition  to  the  new  enter- 
prise, but  aid  substantially  toward  its  completion,  and  in  considera- 
tion thereof  was  to  receive  $135,000  more  than  one-half  the  en- 
tire capital  stock  of  the  Chicago  &  South  Side  Rapid  Transit  R. 
R.Co. 

The  contract  price  for  the  construction  of  the  double  track  road 
from  Van  Buren  St.  to  Jackson  Park  was  $15,000,000,  payable  one- 
half  in  bonds  and  half  in  stock  of  the  Chicago  &  South  Side  Rapid 
Transit  R.  R.  Co.  The  estimated  cost  of  the  completely  equipped 
and  operative  road  was  at  the  outset  $6,750,000.  This  estimate 
was  made  by  Geo.  B.  Cornell,  Chief  Engineer  of  the  first  elevated 
road  built  in  Brooklyn,  N.  Y. ;  $750,000  was  also  set  aside  to  reim- 
burse the  promoters,  making  a  total  of  $7,500,000.  Bonds  for  this 
amount  were  authorized  and  the  first  lot  of  $813,000  was  sold  for 
the  same  amount  in  cash. 

It  will  thus  be  seen  that  the  prospective  profits  of  the  deal  were 
$7,500,000,  or  the  entire  authorized  capital  stock  of  the  company, 
$3,885,000  of  which  was  to  accrue  to  the  Chicago  City  Railway 
Company. 

The  care  with  which  that  company  protected  its  interests  in  the 
premises  may  be  inferred  from  the  detailed  arrangements  under 
which  the  construction  progressed.  Not  only  was  it  represented 
on  the  board  of  the  elevated  road  company  by  three  out  of  five 
directors,  but  its  president,  C.  B.  Holmes,  constituted  one  of  a  com- 
mittee of  two  in  full  control  of  the  finances,  the  other  member  being 
Col.  Walcott,  then  vice-president  of  the  construction  company. 
Furthermore,  all  the  bonds  ($7,500,000)  when  received  from  the 
printers,  were  deposited  with  the  Northern  Trust  Company  in  es- 
crow to  be  drawn  out  only  in  monthly  installments  not  exceeding 
the  actual  cost  of  material  and  labor  put  into  the  foundations,  struc- 
ture, etc.,  as  the  work  progressed,  and  then  only  on  the  joint  order 
of  the  two  committeemen,  the  certificate  of  the  chief  engineer  as  to 
the  work  actually  completed,  and  a  certified  copy  of  each  separate 
resolution  of  the  board  of  directors  of  the  elevated  railroad  author- 


82  MUNICIPAL    AFFAIRS. 

izing  the  issue  of  each  installment  of  bonds  by  way  of  reimburse- 
ment of  its  outlay. 

Even  the  new  chief  engineer  was  an  independent  personage,  ap- 
pointed by  mutual  consent,  and  the  person  selected  for  this  post 
was  taken  direct  from  the  consolidated  elevated  railroads  in  New 
York  City,  where  he  had  been  chief  engineer  for  nearly  fifteen 
years,  in  order  that  he  might  be  absolutely  unprejudiced  in  favor 
of  either  party's  interests  as  against  the  interests  of  the  other. 

With  each  installment  of  bonds,  a  certificate  for  a  corresponding 
amount  of  capital  stock  was  issued  to  the  construction  company, 
and  then  returned  by  that  company  and  split  up  into  certificates  of  a 
smaller  denomination,  half,  representing  the  amount  due  the  Chi- 
cago City  Railway  Co.,  being  transferred  to  the  Chicago  Trading 
Co.,  of  which  Samuel  W.  Allerton,  one  of  the  directors  of  the  City 
Railway  Co.,  was  president,  it  having  been  stipulated  that  this 
share  of  the  stock  was  "to  be  placed  in  the  hands  of  such  person  or 
corporation  as  the  Chicago  City  Railway  Company  shall  designate," 
and  by  resolution  of  the  board  of  directors  of  that  company  passed 
December  13,  1889,  the  Chicago  Trading  Company  was  designated 
"as  the  corporation  to  own  and  hold  the  said  stock." 

The  first  issue  of  bonds  under  the  chief  engineer's  certificate  of 
work  done  was  for  $813,000,  $500,000  of  which  were  purchased  at 
par  by  the  Chicago  City  Railway  Company  and  the  proceeds  de- 
posited in  the  Corn  Exchange  Bank  to  the  order  only  of  the  two 
committeemen.  Subsequently  another  lot  of  $1,500,000  was  sold, 
this  time  at  10  per  cent,  discount,  one-half  of  which  was  taken  by 
the  Chicago  City  Railway  Co.  Another  lot,  $73,000,  at  the  same 
rate  of  discount,  was  also  taken  by  the  same  company,  making  a 
total  of  $1,323,000  in  first  mortgage  bonds  for  which  the  Chicago 
City  Railway  Company  paid  $1,240,700  in  cash. 

It  is  uncertain  to  what  extent  the  company  aided  directly  in  dis- 
posing of  the  remaining  bonds,  but  $3,914,000  were  sold  in  two  lots 
to  parties  in  Chicago,  one  a  director  in  the  company,  at  an  average 
discount  of  11.45  Per  cent.,  and  the  entire  issue  of  $7,500,000  pro- 
duced a  net  return  of  only  $6,157,110,  or  less  than  the  original 
estimate  of  the  cost  of  the  completed  road. 

Early  in  1892  it  became  evident  that  the  cost  of  the  completed 
road  would  greatly  exceed  the  first  estimate,  and  thereupon  dis- 


CHICAGO   STREET    RAILWAYS.  83 

sensions  arose  between  the  parties  in  interest,  and  for  many  months 
after  the  money  gave  out,  the  work  of  construction  was  at  a  full 
stop,  the  construction  company  apparently  being  unable  to  furnish 
more  funds,  and  the  street  railway  company  apparently  being  un- 
willing to  do  so  until  the  construction  company  retired. 

Furthermore,  the  extra  $135,000,  or  controlling  interest  in  the 
stock,  which  it  was  stipulated  should  be  transferred  to  the  street 
railway  company,  was  being  withheld  by  the  construction  com- 
pany. Finally,  on  December  15,  1892,  the  construction  company 
retired  and  the  property  was  turned  over  to  the  elevated  railroad 
itself  to  complete.  The  stock  in  dispute  was  also  transferred  to  the 
Chicago  Trading  Company,  making  a  total  of  $3,885,000  standing  in 
the  name  of  that  company  out  of  a  total  of  $7,500,000. 

One  of  the  legacies  left  by  the  construction  company  was  the 
general  manager  of  that  portion  of  the  road  that  had  been  opened 
for  traffic  and  was  being  operated  by  the  construction  company. 
This  individual  was  also  the  nominal  president  of  the  elevated  rail- 
road company.  Apparently  he  did  not  appreciate  the  logic  of 
events,  for  he  held  on  long  enough  to  be  removed  to  make  room 
for  the  brother  of  the  president  of  the  Chicago  City  Railway  Co. 

At  a  meeting  of  the  stockholders  held  February  16,  1893,  a 
new  issue  of  bonds,  amounting  to  $5,000,000,  was  authorized,  pur- 
porting to  be  a  first  mortgage  on  the  63d  St.  line  of  the  company. 
In  the  meantime  the  Chicago  City  Railway  Co.  had  advanced  $912,- 
ooo  more  toward  the  completion  of  the  elevated  road,  and  between 
February  16,  1893,  and  March  27,  1893,  $350,000  additional,  mak- 
ing a  total  of  $1,262,000,  without  other  security  than  the  ordinary 
notes  of  the  elevated  railroad  company. 

This  remarkable  display  of  confidence  in  the  management  of 
the  elevated  railroad  company,  considering  the  safeguard  under 
which  all  previous  advances  had  been  made,  may  possibly  be  ex- 
plained by  the  supposition  that  the  two  companies  were  at  that 
time  practically  one  and  the  same  institution. 

On  March  28,  1893,  a  further  advance  was  made,  bringing  the 
total  up  to  $1,500,000.  Thereupon  three  new  notes  of  $500,000 
each  were  issued  by  the  elevated  railroad  company  to  the  Chicago 
City  Railway  Co.,  each  secured  by  666  of  the  new  $1,000  so-called 
extension  bonds,  to  take  up  the  others.  Between  March  28,  1893, 


84  MUNICIPAL   AFFAIRS. 

and  July  26,  1893,  the  total  amount  advanced  was  increased  to 
$2,250,000,  secured  by  $3,000,000  of  the  new  bonds. 

The  road  had  now  been  operated  through  the  built  up  portion  of 
the  territory  through  which  it  was  constructed  for  more  than  a 
year,  and  it  had  long  been  evident  that  it  could  not  pay  operation 
expenses  and  interest  on  its  bonded  debt.  In  fact,  up  to  March  30, 
1893,  it  was  $30,000  behind  on  its  operating  expenses  alone. 

Under  these  circumstances  there  was  no  option  left  the  Chicago 
City  Railway  Co.  but  to  accept  the  $3,000,000  collateral  on  the 
$2,250,000  loan  in  full  payment  thereof,  and  return  the  notes  to  be 
canceled,  and  this  was  authorized  August  5,  1893,  and  reported 
done  August  29,  1893. 

The  first  lot  of  $500,000  first  mortgage  bonds  purchased  by  the 
Chicago  City  Railway  was  disposed  of  for  cash  prior  to  1893,  and 
the  balance,  $823,000,  was  likewise  disposed  of  during  1893.  On 
the  other  hand,  the  so-called  extension  bonds  ($3,000,000)  were 
distributed  among  the  stockholders  of  the  Chicago  City  Ry.  Co.  as 
an  extra  dividend  the  same  year  (1893). 

The  $3,885,000  stock  of  the  elevated  railroad  company  was  sur- 
rendered by  the  Chicago  Trading  Company  and  new  certificates 
were  issued  by  the  elevated  railroad  company  in  the  names  of  the 
individual  stockholders  of  the  Chicago  City  Railway  Co.  in  pro- 
portion to  their  holdings  in  the  latter  company. 


EXHIBIT   II.— NORTH    CHICAGO    CITY    RAILWAY    CO. 

Sec.  J. — Lease  of  Road  to  New  Company* 

This  company  was  incorporated  February  14,  1859.  The  great 
fire  of  1871  practically  destroyed  all  of  its  property.  In  1872 
it  began  to  reconstruct  its  track,  and,  by  May  24,  1886, 
had  in  operation  44.774  miles  of  track  (one  mile  of  double-track 
road  being  counted  as  two  miles  of  track). 

On  May  24,  1886,  it  entered  into  an  operating  agreement  with 
the  North  Chicago  Street  Railroad  Company,  by  the  terms  of  which 
it  surrendered  control  of  its  property  for  the  period  of  999  years. 
The  motive  for  this  act  is  set  forth  in  the  preamble  to  the  agree- 
ment, a  part  of  which  is  as  follows : 


CHICAGO   STREET   RAILWAYS.  85 

WHEREAS,  there  is  a  growing  demand  upon  said  railway  company  by  the  public 
for  improved  motive  power,  extensions  of  new  lines,  and  other  improvements  m 
connection  with  its  plant  and  lines  of  street  railway  now  owned,  or  leased 
by  it;  a'nd 

WHEREAS,  the  said  railway  company  is  without  the  facilities  for  constructing 
and  operating  to  the  best  advantage  such  improved  motive  power,  and  purposes  to 
make  a  contract  with  some  party  who  has  faith  that  the  contemplated  improvements 
will  be  profitable  and  who  has  the  facilities  for  making  them;  and 

WHEREAS,  the  said  railway  company  has  been  in  negotiation  with  said  railroad 
company  with  the  view  of  coming  to  some  understanding  that  would  be  mutually 
satisfactory,  upon  which  the  said  railroad  company  would  contract  to  construct 
and  put  in  operation  the  improved  motive  power  and  otherwise  extend  and  im- 
prove the  plant  and  lines  of  said  street  railway  company,  and  have  agreed  upon 
the  terms  and  conditions  hereafter  set  forth ;  and 

WHEREAS,  the  said  railway  company  has  accepted  said  terms  and  has  requested 
that  the  said  railroad  company  furnish  for  it  the  appliances  necessary  for  such  new 
motive  power,  and  to  operate  the  same,  and  also  from  time  to  time,  when  feasible 
and  desirable,  to  make  such  extensions  and  other  improvements  as  the  public  may 
require,  and  be  approved  by  the  Board  of  Directors  of  said  companies,  it  being 
understood  that  a  part  of  the  lines  of  said  railway  company  shall  be  cabled  within 
the  time  hereafter  named,  and  the  balance  from  time  to  time,  as  may  be  directed 
in  the  manner  aforesaid,  and  to  insure  the  proper  operation  of  the  cable  portion, 
the  whole  line  must  be  put  in  exclusive  charge  of  the  railroad  company,  *  *  * 

The  "railway  company"  referred  to  was  the  North  Chicago 
City  .Railway  Company  and  the  "railroad  company"  the  North 
Chicago  Street  Railroad  Company. 

The  terms  referred  to  as  having  been  agreed  upon  were,  in 
brief,  as  follows : 

"In  consideration  of  mutual  promises,  and  of  the  sum  of  one 
dollar  by  each  to  the  other  respectively  paid,  *  *  *  [the  par- 
ties concerned]  *  *  *  do  covenant,  promise  and  agree  to 
stand  with  each  other,  as  follows :" 

1.  Agreement  to  continue  for  999  years  "     *     *     *     and 
during  said  term  shall  bind  the  parties  without  any  right  in  either 
company  to  revoke  the  same  without  the  written  consent  of  the 
other." 

2.  The  North  Chicago  Street  Railroad  Company  to  construct, 
with   reasonable   speed,    a   cable   road   on    North    Clark    Street, 
"     *     *     *     commencing  at  some  convenient  point  near  the  north 
end  of  the  Bridge  crossing  the  Chicago  River,  to  a  point  near 
Diversey  Street  in  the  town  of  Lake  View,"  the  same  to  be  com* 
pleted  within  two  years  after  permission  from  the  city  and  town 
authorities  is  granted  "     *     *     *     and  for  the  purpose  of  perpet- 


86  MUNICIPAL    AFFAIRS. 

uating  reliable  evidence  to  be  used  in  an  equitable  adjustment  be- 
tween the  parties  hereto  in  case  this  contract  shall  be.  terminated 
in  any  manner  as  hereinafter  set  forth,  it  must  keep  an  accurate 
account  of  its  expenditures  in  and  about  said  improvements,  charg- 
ing therefor  the  actual  cost  thereof,  *  *  *  ." 

"The  railway  company  will  execute  and  deliver  a  mortgage  of 
its  franchises  and  property  to  secure  the  payment  of  all  amounts  and 
interest  thereon  at  the  rate  of  six  per  cent  per  annum,  payable  semi- 
annually,  which  shall  be  expended  by  the  said  railroad  company  in 
such  construction,  or  the  making  of  the  improvements  and  exten- 
sions herein  provided  for.  The  amount  so  expended,  with  the  in- 
terest thereon,  as  before  provided,  shall,  in  the  event  of  the  termina- 
tion of  this  agreement  by  the  parties  hereto,  or  otherwise,  or  by 
reason  of  the  intervention  of  any  court  of  competent  jurisdiction, 
at  once  become  due  and  payable,  and,  if  the  amount  found  to  be 
due  shall  not  be  paid,  the  said  mortgage  may  be  immediately 
foreclosed." 

3.  The  North  Chicago  Street  Railroad  Company  is  required 
to  construct  and  operate  such  cable  road  as  is  necessary  "     *     *     * 
other  than  above  provided  for     *     *     [but]     *     *     such  addi- 
tional construction  shall  only  be  with  the  assent  of  both  of  the 
parties     *     *     [or]     *     *     as  shall  be  mutually  agreed  upon  from 
time  to  time." 

"Such  additional  improvements  shall  be  constructed  by  said 
railroad  company,  and  be  paid  for,  and  be  secured  for  the  repayment 
thereof  by  railway  company  in  the  manner  heretofore  provided  for 
as  to  that  portion  of  said  railway  on  North  Clark  Street,  between 
the  bridge  and  Diversey  Street,  or  at  the  option  of  said  railroad 
company,  it  shall  have  the  right  to  require  said  railway 
company  to  issue  its  bonds  for  the  amount  of  any  such  expenditures 
in  the  form,  when  due,  and  bearing  such  rate  of  interest  as  said  rail- 
road company  may  require,  and  to  be  secured  by  mortgage  on  all, 
or  a  part,  of  the  property  of  said  railway  company." 

4.  It  is  expressly  stipulated  that  the  North  Chicago  Street 
Railroad  Company  "     *     *     *     will  hereafter  supply,  at  its  own 
cost  and  charge,  such  cars,  harness  and  horses  as  shall  be  necessary 
in  addition  to  those  now  owned  by  the  railway  company,     *     * 
[and]     *     *     the  same  thus  supplied  shall  be  the  property  of  the 
railroad  company." 


CHICAGO   STREET   RAILWAYS.  87 

5.  "Betterments  shall  be  made  and  constructed  by  the  rail- 
road company  as  the  same  shall  be  agreed  upon  hereafter  by  the 
parties  hereto.     The  cost  of  the  same  shall  be  paid  to  the  railroad 
company  in  the  manner  heretofore  provided  in  the  case  of  construc- 
tion of  cables  and  motors.     Within  the  term  'betterments'  shall  be 
comprised  all  construction,  other  than  the  Clark  Street  line  and 
other  improvements  which  the  railroad  company  has  agreed  to  do 
in  connection  therewith  and  replacements,  such  as  extension  of  rail- 
ways, new  buildings  and  alterations  and  improvements  of  existing 
railways  and  buildings." 

6.  An  appraisement  of  all  the  personal  property  of  the  North! 
Chicago  City  Railway  Company  is  provided  for,  the  North  Chicago 
Street  Railroad  Company  to  be  permitted  "     *     *     *     to  use  the 
same  or  their  proceeds  without  charge     *     *     [but]     *     *     in 
case  of  the  termination  of  this  contract  for  any  cause,  the  railroad 
company  shall  pay  to  the  railway  company  the  amount  of  said  ap- 
praisement with  interest  only  from  the  time  of  such  termination." 

As  an  offset,  any  property  of  the  same  character  owned  by  the 
North  Chicago  Street  Railroad  Company  that  may  be  in  use  on  the 
North  Chicago  City  Railway  Company's  road  at  the  time  of  the 
termination  of  the  agreement  must  likewise  be  appraised  and  its 
value  may  be  set  off  against  the  claim  of  the  North  Chicago  City 
Railway  Company. 

7.  Quarter-annually,  commencing  July  1st,  1886,  the  North 
Chicago    Street   Railroad   stipulates   to   pay   the   other  company 
$37,500,  also  the  interest  on  all  bonds  and  mortgages  of  the  "rail- 
way company"   then  outstanding  "and  which   may  hereafter  be 
created  in  the  renewal  and  extension  thereof,  and  all  which  may 
hereafter  be  created  for  the  betterments  and  new  constructions 
heretofore  provided  for     *     *     * 

It  is  further  stipulated  that  "  *  *  *  as  soon  as  the  cable 
to  be  constructed  on  North  Clark  Street,  as  herein  provided,  is  com- 
pleted, the  railroad  company  shall  pay  to  the  railway  company  out 
of  its  own  funds  $500,000  in  cash,  or,  at  its  own  option,  in  lieu 
thereof  the  same  amount  in  the  shares  of  its  capital  stock,  assess- 
ments paid  *  *  *  ." 

Sec.  2.— Financial  Condition  in  1886. 

The  inventory  of  property  transferred  to  the  North  Chicago 


88 


MUNICIPAL    AFFAIRS. 


Street  Railroad  Company  under  the  above  agreement  was  as  fol- 
lows: 

1,691  Horses,   at $100  $169,100.00 

175  Box  cars,  at 700  122,500.00 

175  Open  cars,  at 500  87,500.00 

10  Snow-plows,  at 500  5,000.00 

6  Sweepers,   at 1,000  6,000,00 

6  Salters,  at 200  1,200,00 

7  Hay-cutters,   at 50  350.00 

575  Sets  harness,  at 15  8,625.00 

9  Wagons,  at 50  450.00 

4  Buggies,  at 50  200.00 

1,400  tons  of  hay,  at 10  14,000.00 

Horseshoes  and  nails 1,500.00 

Track  material 6,750.00 

Track  tools,  shovels,  picks,  etc 250.ot 

Material  in  hands  of  purchasing  agent 420.79 

Office    furniture 500.00 

Stable  furniture,  etc, — 

City    Limits 200 

Lincoln    Ave 200 

Racine   Ave 150 

Clybourn  Ave 150 

Kroger    St 150 

Larrabee  St 150 

Sedgwick   St 150 

Clark  St 50 

1,200.00 

Cash  60,371.59 

Inter-Ocean  bonds,  6  at  $500 3,000.00 

Due  from  Merchants  Loan  &  Trust  Co 147*28 

Due  from  City  of  Chicago 425.00 

Total $489,489.66 

A  trial  balance  of  the  general  ledger  of  the  North  Chicago  City 
Railway  Company  on  May  24,  1886,  exhibits  its  financial  condition 
as  follows : 

TRIAL    BALANCE,    MAY    24,    1 886,    NORTH    CHICAGO    CITY    RY.    CO. 

Construction    $908,324.78     Capital  stock  $500,000.00 

Real  estate  418,024.84     Bonds 1,247,000.00 

Buildings 245,188.37     Bills  payable  54,000.00 

Cars   210,000.00     Accounts    payable 25,001.96 

Horses   169,100.00     Income  account 228,275.69 

Miscellaneous  equipments  . . .  12,200.00 

Harness  8,625.00 

Wagons  and  buggies 650.00 

Hay 14,000.00 

Horseshoes  and  nails  1,500.00 

Stable  account 1,550.00 

Tools  250.00 

Office  furniture 500.00 

Supplies  420-79 

Inter-Ocean  bonds  3,000.00 

Merchants'  Loan  &  Trust  Co  147.28 

City  of  Chicago 425.00 

Cash  60,371.59 


$2,054,277.65 


$2,054^77-65 


CHICAGO   STREET   RAILWAYS.  89 

A  trial  balance  of  the  books  of  the  North  Chicago  Street  Rail- 
road Company  immediately  after  that  company  assumed  control 
makes  the  following  exhibit: 

TRIAL  BALANCE,   MAY  24,    l886,   NORTH    CHICAGO   ST.  RAILROAD  CO. 

Liabilities  of  N.  C.  C.  Ry.  Co.  assumed $79,001.96 

Cash    60,371.59 

Merchants'  Loan  &  Trust  Co 147.28 

City  of   Chicago 425.00 

Inter-Ocean    bonds 3,000.00 

$142,945.83 

Bills  payable  N.  C.  C.  Ry.  Co $54,000.00 

Accounts  payable  N.  C.  C.  Ry.  Co 25,001.96 

Income   account 63,943.87 

$142,945.83 

A  comparison  of  the  foregoing  schedules  shows  that  with  the 
exception  of  the  $60,371.59  cash,  $147.28  due  from  the  Merchants' 
Loan  &  Trust  Company,  $425  due  from  the  City  of  Chicago  and  the 
$3,000  Inter-Ocean  bonds,  none  of  the  property  referred  to  in  the 
inventory  was  transferred  to  or  entered  in  the  books  of  the  new 
company.  Neither  was  any  entry  made  to  represent  the  44.774 
miles  of  the  road,  nor  the  real  estate,  buildings,  and  equipment 
transferred  under  the  lease.  It  is  true,  these  properties  did  not 
form  part  of  the  permanent  assets  of  the  North  Chicago  Street  Rail- 
road Company,  although  the  long  lease  of  999  years  contemplated 
practically  a  complete  transfer ;  neither  did  the  items  enumerated  in 
the  inventory,  nevertheless,  some  of  the  items  in  the  inventory  are 
taken  up,  and,  as  will  be  seen  above,  the  incompleteness  of  the  en- 
tries necessitated  a  credit  to  Income  Account  of  $63,943.87  to  bal- 
ance the  accounts,  although  the  company  had  as  yet  derived  no  in- 
come from  the  use  of  the  property. 

An  intelligent  record  of  the  transactions  affected  by  or  growing 
out  of  the  lease  required  a  debit  entry  on  the  books  of  the  lessee 
company  of  a  sum  or  sums  representing  either  the  book  or  ap- 
praised value  of  all  the  property  of  every  description  transferred, 
whether  permanently  or  temporarily,  and  a  corresponding  entry 
representing  the  aggregate  value  of  the  property  to  the  credit  of  the 
North  Chicago  City  Railway  Company  to  balance  the  account. 
Sec.  3.— N.  C  S.  R.  R*  Co.  Buys  Controlling  Interest. 

On  June  29,  1886,  or  one  month  following  the  lease,  the  direc- 
tors of  the  North  Chicago  Street  Railroad  Company  determined  to 


90  MUNICIPAL    AFFAIRS. 

purchase  2,501  of  the  5,000  shares  of  the  North  Chicago  City  Rail- 
way Company's  capital  stock  and  authorized  the  expenditure  of  $i,- 
500,600  for  that  purpose,  or  at  the  rate  of  $600  per  share  ($100  be- 
ing par). 

The  actual  purchase  was  not  made  until  September  16,  1886, 
when  the  books  of  the  North  Chicago  Street  Railroad  Company 
show  the  following  entries: 
Purchase  of  North  Chicago  City  Railway  Company  stock,  Dr. — 

To  Wm.  L.  Elkins  and  Peter  A.  B.  Widener,  for  2,501  shares  of 
North  Chicago  City  Railway  Company  stock  as  per  resolution  of 
Board  of  Directors  passed  June  29,  1886 $1,500,600 

Immediately  following  this  entry,  and  of  the  same  date,  is  an- 
other showing  that  the  credit  to  William  L.  Elkins  and  P.  A.  B. 
Widener  was  partially  offset  by  the  delivery  to  them  of  the  first  issue 
of  bonds  made  by  the  North  Chicago  Street  Railroad  Company, 
viz. : 
Wm.  L.  Elkins  and  Peter  A.  B.  Widener,  Dr.— 

To  bond  account  for  3,000  5  per  cent  20-year  $500  mortgage  bonds, 
dated  July  i,  1886,  issued  in  pursuance  to  resolution  of  Board  of 
Directors,  passed  June  29,  1886 $1,500,000 

According  to  the  1896  issue  of  the  Economist  Street  Railway 
Supplement,  these  shares  were  only  a  short  time  previously  pur- 
chased from  Jacob  Rehm,  V.  C.  Turner  and  others  by  the  United 
States  Construction  Company,  from  which  Company  they  were  evi- 
dently transferred  to  William  L.  Elkins  and  Peter  A.  B.  Widener 
before  delivery  to  the  North  Chicago  Street  Railroad  Company  as 
above  noted. 

On  this  subject  the  Economist  says : 

In  March,  1886,  Charles  T.  Yerkes  and  his  Philadelphia  associates  purchased 
from  Jacob  Rehm  729  shares  of  the  capital  stock,  from  V.  C.  Turner  and  others 
represented  by  Mr.  Turner,  1,772  shares,  making  a  total  of  2,501  shares  of  the  5,000 
shares  outstanding.  The  price  was  $600  a  share.  The  total  payment  of  $1,500,600 
was  made  in  cash  at  the  Merchants'  Loan  &  Trust  Company  March  23,  1886.  The 
purchase  was  made  in  the  name  of  the  United  States  Construction  Company. 

There  is  nothing  in  the  books  of  either  the  lessee  or  lessor  com- 
pany to  confirm  this  statement  If  true,  it  would  seem  to  indicate 
that  whatever  profit  there  was  in  the  deal  accrued  solely  to  the  ben- 
efit of  Jacob  Rehm  and  V.  C  Turner  and  those  whom  they  repre- 
sented, as  the  stock  was  turned  over  to  the  North  Chicago  Street 
Railroad  Company  by  Elkins  and  Widener  at  the  same  price  per 
share  that  Rehm  and  Turner  received  for  it. 


CHICAGO    STREET    RAILWAYS.  91 

Sec.  4. — Contracts  for  Conversion  to  Cable  Traction. 

On  May  24,  1886,  the  North  Chicago  Street  Railroad  Company 
entered  into  a  contract  with  the  United  States  Construction  Com- 
pany "  *  *  *  to  construct  and  put  in  operation  a  cable  line  on 

Clark  Street  from  at  or  near  Kinzie  street to  the  Limits 

barn  in  Lake  View."  The  United  States  Construction  Company 
was  also  to  secure  for  the  railroad  company  the  right  to  lay  tracks 
on  La  Salle  Street  and  Avenue  between  Illinois  and  Jackson  streets, 
and  on  Illinois  between  Clark  and  Wells  streets,  and  through  the 
La  Salle  Street  tunnel.  No  particular  reference  was  made  to  a 
cable  line  on  Wells  Street,  nor  to  the  loop  line  on  Monroe,  Dear- 
born and  Randolph  streets,  nor  to  the  purchase  of  any  land  upon 
which  to  erect  power  houses.  All  of  these  matters  seem  to  have 
been  left  to  the  judgment  of  the  Construction  company.  Even  the 
consideration  to  be  paid  the  Construction  company  is  uncertain,  ex- 
cept that  "  *  *  *  not  less  than  $4,500,000,  payable  in  the 
stock  of  the  said  company  *  *  [is  named]  *  *  provided 
the  length  of  said  North  Chicago  Street  Railroad  Company  does 
not  exceed  15  miles." 

Under  this  contract  5.958  miles  single  track  horse  road  on 
North  Clark  Street,  from  Wells  Street  to  Diversey  Street, were  con- 
verted into  cable  road  and  likewise  3.543  miles  single  track  on  Wells 
Street  from  Illinois  to  the  junction  of  Wells  Street  and  North  Clark 
Street. 

The  only  cable  line  specifically  referred  to  in  the  lease  of  May 
24,  1886,  was  that  to  be  constructed  on  North  Clark  Street,  and 
whatever  expense  the  North  Chicago  Street  Railroad  Company 
might  incur  in  its  construction  was  to  be  a  charge  against  the  North 
Chicago  City  Railway  Company,  to  be  liquidated  only  in  the  con- 
tingency of  a  termination  of  the  lease  at  the  end  of  or  before  the 
expiration  of  999  years.  In  the  event  of  any  other  cable  road  being 
constructed  (the  lease  providing  that  this  only  could  be  done  by 
mutual  agreement),  it  was  optional  with  the  North  Chicago  Street 
Railroad  Company  to  carry  the  expense  as  a  charge  against  the  les- 
sor company,  the  same  as  in  the  case  of  the  North  Clark  Street  line, 
or  it  could  require  the  lessor  company  to  increase  its  outstanding 
bonded  indebtedness  to  the  extent  of  the  sum  expended  for  con- 
struction and  deliver  the  new  bonds  to  the  lessee  company  by  way 


92  MUNICIPAL   AFFAIRS. 

of  reimbursement  for  its  expenditures.  In  either  case,  however,  the 
lease  stipulated  that  "  *  *  *  for  the  purpose  of  perpetuating 
reliable  evidence  to  be  used  in  an  equitable  adjustment  between  the 
parties  hereto  *  *  'an  accurate  account  of  the  expenditures 
must  be  kept  and  into  that  account  only  must  be  charged  "  *  * 
the  actual  cost  of  the  imrovements  *  *  *  ." 

No  such  records  are  to  be  found  in  the  books  of  the  lessee  com- 
pany, and  it  does  not  appear  upon  what  showing  the  directors  of 
the  lessor  company  consented  to  the  issue  of  new  bonds  for  such 
improvements  as  was  the  case  several  times  subsequent  to  the  trans- 
fer of  the  property  to  the  lessee  company.  For  example,  on  Sep- 
tember 20,  1887,  the  lessee  company  entered  into  a  contract  with 
the  United  States  Construction  Company  to  cable  Lincoln  Avenue 
from  Wrightwood  Avenue  to  Center  Street  and  Center  Street  from 
Lincoln  Avenue  to  North  Clark  Street,  forming  a  junction  at  that 
point  with  the  cable  road  on  North  Clark  Street,  a  total  of  2.724 
miles  single  track  cable  road.  The  contract  also  provided  for  the 
erection  of  a  new  power  house  at  Wrightwood  and  Lincoln  avenues, 
on  land  already  owned  by  the  North  Chicago  City  Railway  Com- 
pany, on  which  was  standing  the  car  barn  of  that  company.  The 
consideration  to  be  paid  was  $500,000  in  4^  per  cent  4O-year  bonds 
of  the  North  Chicago  City  Railway  Company. 

Three  hundred  of  these  bonds,  representing  $300,000,  were  is- 
sued by  the  last-named  company  on  May  i,  1888,  and  delivered  to 
the  United  States  Construction  Company,  and  on  February  21, 
1889,  198  more  bonds,  representing  $198,000,  were  delivered,  and 
$2,000  in  cash  to  complete  the  contract. 

On  January  25,  1890,  a  similar  contract  was  made  with  the 
United  States  Construction  Company  to  cable  Clybourne  Avenue 
from  the  terminus  near  Fullerton  Avenue  to  Division  Street  and 
Division  Street  to  the  junction  with  the  cable  road  on  Wells  Street 
at  Division  and  Wells  streets,  a  distance  of  4.459  miles  single  track 
cable  road.  Nothing  further  was  called  for  by  this  contract,  the 
consideration  being  $500,000  in  4^  per  cent  bonds  of  the  North 
Chicago  City  Railway  Company. 

By  the  terms  of  this  contract  the  approximate  cost  of  con- 
structing a  mile  of  cable  road  is  obtained.  Assuming  that  it  re- 
quired the  full  $500,000  to  complete  the  4.459  miles  of  single  track 


CHICAGO   STREET   RAILWAYS.  93 

referred  to  and  omitting  from  consideration  the  4,000  lineal  feet  of 
underground  conduit  on  Division  and  Clark  streets,  connecting  this 
section  of  road  with  the  power  house  on  Clark  Street,  the  cost  per 
mile  would  be  $112,132.77.  As  this  assumption  allows  no  profit  for 
the  Construction  company,  it  cannot  very  well  be  under  the  actual 
cost,  and,  if  taken  as  a  basis  for  estimating  the  cost  of  the  entire 
road,  does  no  injustice  to  the  management  for  that  reason,  since  the 
absence  of  any  other  reliable  data  on  the  subject  renders  its  adop- 
tion necessary. 

At  the  same  time,  there  is  every  reason  to  suppose  that  the  cost 
originally  estimated  was  $425,000,  with  $75,000  added  for  profit  and 
risk,  being  a  margin  of  nearly  20  per  cent  over  the  estimated  cost, 
a  percentage  not  infrequently  adopted  in  estimating  for  contract 
work.  This  gives  an  estimated  cost  of  $95,000  per  mile  of  single 
track,  which  is  a  little  less  than  the  actual  cost  per  mile  of  the  Blue 
Island  Avenue,  Halsted  Street  and  Van  Buren  Street  cable  lines 
of  the  West  Chicago  Street  Railroad  Company. 

An  earnest  endeavor  has  been  made  to  induce  the  management 
of  the  North  Chicago  Street  Railroad  Company  to  produce  the 
books  of  the  United  States  Construction  Company  for  examination, 
but  without  success,  as  fully  explained  elsewhere  in  this  report. 
The  necessity  for  some  definite  information  concerning  the  actual 
cost  of  the  work  done  by  the  United  States  Construction  Company 
is  so  obvious  that,  in  the  absence  of  the  books  referred  to,  an  esti- 
mate of  the  cost  of  the  whole  road  based  upon  certain  parts,  the  cost 
of  which  is  known,  would  seem  to  be  warranted  and  fair. 

Certainly  no  injustice  will  be  done  the  management  of  the 
North  Chicago  Street  Railroad  Company  if,  in  adopting  the  sum  of 
$112,132.77  as  the  average  cost  per  mile  of  the  entire  North  Side 
cable  road,  it  should  subsequently  appear  that  the  amount  actually 
paid  the  Construction  company  was  greatly  in  excess  of  that  price. 
On  the  contrary,  when  it  is  considered  that  the  sum  mentioned  is 
$6,000  per  mile  greater  than  the  cost  of  a  precisely  similar  road  on 
Blue  Island  Avenue,  Halsted  Street  and  Van  Buren  Street,  includ- 
ing the  Adams  Street  loop,  both  being  built  from  practically  the 
same  specifications,  and  that  it  is  $30,000  per  mile  greater  than  the 
first  experimental  section  of  cable  road  ever  built  in  Chicago,  being 
the  lines  on  State  Street  and  Wabash  and  Cottage  Grove  avenues, 


94  MUNICIPAL    AFFAIRS. 

north  from  Thirty-ninth  street,  including  the  downtown  loop,  con- 
structed nearly  ten  years  earlier  than  the  cable  road  on  the  North 
Side;  and  $50,000  per  mile  greater  than  the  subsequent  extensions 
of  the  South  Side  cable  lines,  completed  about  the  same  time  as  the 
North  Clark  and  Wells  Street  lines,  and  even  $50,000  per  mile 
greater  than  the  track  construction  of  the  Van  Buren  Street  tunnel, 
it  is  difficult  to  see  how  any  suspicion  of  unfairness  to  the  railroad 
management  can  attach  to  the  sum  selected  for  the  purpose  speci- 
fied, particularly  as  the  management  has  created  the  necessity  for 
its  selection  by  not  producing  the  records  which  the  lease  of  May 
24,  1886,  explicitly  stipulated  should  be  preserved. 

In  addition  to  the  16.684  miles  single  track  cable  road  already 
referred  to  as  having  been  constructed  by  the  North  Chicago  Street 
Railroad  Company,  for  the  account  of  the  North  Chicago  City  Rail- 
way Company,  there  was  also  constructed  the  La  Salle,  Monroe, 
Dearborn  and  Randolph  streets  loop  of  1.626  miles  single  track, 
making  a  total  of  18.310  miles  single  track  cable  road  built  by  the 
United  States  Construction  Company  at  an  estimated  aggregate 
cost  of  $2,053,151.00,  or  at  the  rate  of  $112,132.77  per  mile. 

On  January  12,  1887,  a  contract  was  entered  into  with  the 
United  States  Construction  Company  to  build  11.385  miles  single 
track  new  horse  road,  cost  of  which  I  have  estimated  at  $255,914.99, 
or  $22,478.26  per  mile,  being  the  same  rate  per  mile  as  the  actual 
cost  for  similar  road  built  by  the  North  Chicago  Street  Railroad 
Company  about  the  same  time,  viz.:  11.682  miles  single  track  at 
$22,478.26  per  mile,  or  an  aggregate  of  $262,591.03. 

In  addition  thereto  the  lessee  company  built  3.626  miles  single 
track  new  electric  road  at  $20,530.15  per  mile,  and  converted  22.280 
miles  single  track  horse  road  into  electric  road  at  $14,428.15  per 
mile,  and  28.173  miles  at  $20,530.15  per  mile,  making  a  grand  total 
of  $3,740,926.65  expended  for  track,  including  $115,885.61  for  mis- 
cellaneous paving  and  $79,001.96  old  floating  debt  assumed  for  ac- 
count of  the  North  Chicago  City  Railway  Company 

Under  the  contract  of  May  24,  1886,  the  United  States  Con- 
struction Company  erected  two  cable  power  houses — one  on  Clark 
Street,  between  Elm  and  Maple  streets,  and  one  on  Illinois  Street, 
corner  La  Salle  Avenue.  The  one  erected  at  Clark  Street  and 
Elm  Street  is  on  property  belonging  to  the  North  Chicago  City 


CHICAGO    STREET    RAILWAYS.  95 

Railway  Company.  Four  engines  of  500  horse-power  each  were 
originally  installed  at  this  power  house. 

Now  the  most  expensive  cable  power  house  in  the  city  is  that 
which  operates  the  Blue  Island  Avenue  and  Halsted  Street  cable 
system  on  the  West  Side,  the  machinery  in  which  cost  $173,240.47. 
The  engines  are  3,600  horse-power.  The  machinery  in  the  Van 
Buren  Street  power  house  cost  $116,627.53,  and  the  engines  are 
2,600  horse  power.  At  the  same  rate  of  decrease  in  cost  per  horse 
power,  the  cost  of  the  machinery  at  the  Clark  Street  power  house 
would  be  $84,659.79,  or  $42  per  horse-power. 

The  cost  of  the  Van  Buren  Street  power  house  was  $142,- 
326.44  and  that  of  the  Blue  Island  Avenue  power  house  $233,290.50, 
both  including  the  land  as  well  as  the  buildings,  whereas  the  land 
on  which  the  Clark  Street  power  house  is  erected  was  already 
owned  by  the  North  Chicago  City  Railway  Company.  A  fair  es- 
timate of  the  cost  of  the  building,  therefore,  would  not  exceed 
$50,000,  or  $135,000  for  the  building  and  machinery,  and  $200,000 
for  the  land,  building  and  machinery  at  Illinois  Street  and  La  Salle 
Avenue. 

The  contract  of  September  20,  1887,  for  the  Lincoln  Avenue 
cable  also  provided  for  the  erection  of  a  power  house  at  Lincoln 
and  Wrightwood  avenues.  The  contract  price  for  the  cable  road 
and  power  house  was  $500,000.  At  $112,132.77  per  mile  for  the 
2.724  miles  of  single  track  cable  road  would  leave  $194,550.33  to 
cover  the  cost  of  the  power  house  and  machinery,  and  allow  for 
the  profit  of  the  United  States  Construction  Company.  As  the 
land  on  which  the  power  house  is  erected  was  already  owned  by  the 
North  Chicago  City  Railway  Company,  if  10  per  cent,  or  $50,000, 
is  deducted  for  profit,  the  balance,  $144,550.33,  would  seem  to 
be  a  fair  estimate  of  the  cost  of  the  power  house  and  machinery. 

The  contract  of  January  12,  1887,  in  addition  to  providing  for 
the  construction  of  11.385  miles  of  single  track  horse  road,  required 
the  construction  of  a  brick  barn  adjoining  the  Clark  Street  power 
house,  the  cost  of  which  was  approximately  $75,000,  the  land  be- 
ing owned  already  by  the  North  Chicago  City  Railway  Company. 
It  also  required  the  removal  of  the  Wells  Street  bridge  to  Dear- 
born Street  and  the  erection  of  a  new  four-track  iron  bridge  at 
Wells  Street.  The  contract  of  May  24,  1886,  also  required  the 
erection  &f  a  new  four-track  iron  bridge  at  Clark  Street. 


96  MUNICIPAL   AFFAIRS. 

The  cost  of  these  bridges  was  as  follows:  Clark  Street,  $132,- 
375;  Wells  Street,  $145,750;  total,  $278,125. 

Sec.  5. — Cost  of  Reconstruction* 

This  completes  all  the  expenditures  made  for  account  of  the 
North  Chicago  City  Railway  Company  down  to  December  31,  1897, 
and  includes  the  cost  of  all  construction  done  by  the  United  States 
Construction  Company  on  the  North  Side,  viz : 

18.31    miles  cable  road,  at  $112,132.77 $2,053,151.00 

11.385  miles  horse  road,  at  $22,478.26 255,914.99 

Clark  street  power  house  and  machinery 135,000.00 

Illinois  street  power  house  and  machinery 200,000.00 

Lincoln  avenue  power  house  and  machinery 144,550.33 

Clark  street  barn 75,000.00 

Clark  and  Wells  street  bridges 278,125.00 


Total $3,141,741.33 

For  these  improvements  the  United  States  Construction  Com- 
pany has  received  $4,500,000  in  the  capital  stock  of  the  North  Chi- 
cago Street  Railroad  Company,  $998,000  in  4^  per  cent  bonds  of 
the  North  Chicago  City  Railway  Company,  and  $710,908.39  in 
cash  from  the  North  Chicago  Street  Railroad  Company — a  total  of 
$6,208,908.39,  or  $3,067,167.07  in  excess  of  the  approximate  cost  of 
the  betterments  furnished. 

The  improvements  paid  for  by  the  North  Chicago  Street  Rail- 
road Company  direct,  without  the  intermediation  of  a  construction 
company,  were  as  follows: 

11.682  miles  new  horse  road,  at  $22,478.26 $262,591.03 

3.626  miles  new  electric  road,  at  $20,530.15 74,442.32 

28.173  miles  electric  road  converted  from  horse  road,  at  $20,530.15 578,395.92 

22.280  miles  horse  road,  at  $14,428.15 321,543.82 

Real  estate  improvements 214,865.79 

Miscellaneous  paving   115,885.61 

Miscellaneous — 

Electric  light  LaSalle  street  tunfcel $3,200.00 

Dearborn  street  bridge 2,934.00 

Wells  street  bridge 779-4O 

Clark  street  cable  station 9,314.29 

LaSalle  avenue  cable  station 21,990.46 

Cable  shears 340.00 

Elm  street  station 2,143.00 

Lincoln  avenue  station 1,353-12 

Pumping  station  LaSalle  street  tunnel 764.17 

Nast  Splicing  system 3,000.00 

Loop  alterations  8,854.84 


CHICAGO   STREET    RAILWAYS.  97 

Lincoln  avenue  renewal $8,496.77 

Limits  loop 3,527-OO 

12,02377 


$1,634,421.54 
making  a  grand  total  of  $4,776,162.86. 

To  this  should  be  added  the  $79,001.96  old  floating  debt  of  the 
lessor  company  assumed  and  paid  by  the  lessee  company,  and  the 
$3,067,167.07  profit  of  the  United  States  Construction  Company 
on  the  several  contracts  for  construction,  making  the  total  expendi- 
tures of  the  lessee  company  for  account  of  the  lessor  company  $7,- 
922,331.89.  In  part  payment  the  lessor  company  has  issued  $i,- 
750,000  in  bonds,  leaving  a  balance  of  $6,172,331.89  still  due  lessee 
company  on  December  31,  1897. 

Sec.  6.— Original  Cost  of  Horse  Road. 

The  mileage  of  this  road  on  May  24,  1886,  was  44.774  miles 
single  track  horse  railroad,  and  cost,  according  to  the  books  of 
the  company,  $908,324.78,  or  an  average  of  $20,286.88  per  mile. 

Of  the  original  road  there  still  remains  unchanged  0.153  miles 
horse  railroad,  representing  an  original  cost  value  of  $3,103.89. 

The  remaining  44.621  miles  single  track  have  been  converted 
into  cable  and  electric  road,  as  follows:  16,448  miles  into  cable  at 
$112,132.77,  $1,844,359.80;  28.173  miles  into  electric  at  $20,530.15, 
$578,395.92.  Since  the  lease  of  May  24,  1886,  the  following  road 
has  been  built:  1.862  miles  new  cable  at  $112,132.77,  $208,791.20; 
23.067  miles  horse  at  $22,478.26,  $518,506.02.  Of  the  23.067  miles 
single  track  new  horse  road  22.28  miles  were  subsequently  con- 
verted into  electric  road  at  $14,428.15  per  mile,  or  $321,543.82  in 
the  aggregate.  The  remaining  0.787  miles  is  still  unchanged  as 
horse  railroad. 

In  addition  to  the  foregoing  road  3.626  miles  single  track  new 
electric  road  were  built  at  $20,530.15  per  mile,  or  $74,442.32  in  the 
aggregate*  making  a  grand  total  of  $4,454,363.86,  recapitulated  as 
follows : 

44.774  miles  original  horse  road,  at  $20,286.88 $908,324.78 

16.448  miles  original  horse  road  converted  into  cable,  at  $112,132.77. .. .  1,844,359.80 

23^067  miles  new  horse  road,  at  $22,478.26 518,506.02 

28.173  miles  original  horse  road  converted  into  electric,  at  $20,530.15.. .  578,395.92 

22.280  miles  new  horse  road  converted  into  electric,  at  $14,428.15 321,543.82 

1,862  miles  new  cable,  at  $112,132.77 208,791.20 

3.626  miles  new  electric,  at  $20,530.15 74,442.32 

$4,454,363.86 


98  MUNICIPAL    AFFAIRS. 

Sec.  7.— Original  Cost  of  Present  Assets. 

Of  the  above  road  there  was  still  existing  on  December  31, 
1897,  the  following: 

18.310  miles  cable,  at  $112,132.77 $2,053,151.00 

22.280  miles  electric,  at  $14,428.15 321,543.82 

31.799  miles  electric,    at   $20,530.15 652,838.24 

22.280  miles  paving   relaid  when   road   was   converted    from   horse   to 

electric 115,885.61 

0.153  miles  horse  road,  at  $20,286.88 3,103.89 

0.787  miles  horse  road,  at  $22,478.26 17,690.39 


73-329  miles  $3,164,212.95 

showing  a  total  depreciation  amounting  to  $1,290,150.91. 

In  the  case  of  the  54.079  miles  single  track  electric  road  in 
the  above  schedule,  a  large  amount  of  the  pavement  already  down 
was  relaid  when  the  road  was  converted  from  horse  to  electric  road. 
The  original  cost  value  of  such  pavement  was  $135,952.80,  and  by 
being  relaid  became  incorporated  into  the  cost  value  of  the  new 
electric  road. 

The  following  schedule  shows  the  distribution  of  the  cost  value 
of  the  54.079  miles  single  track  electric  road  of  the  North  Chicago 
City  Railway  Company  on  December  31,  1897: 

Overhead  and  underground  electric  construction.  $405,555.19;  per  mile,  $7,499-31 

Paving   329,990.30 ;  per  mile,  6,102.00 

Steel  rails,  85  Ibs 226,906.89 ;  per  mile,  4,194.29 

Miscellaneous  material  and  labor 147,882.48 ;  per  mile,  2,734.55 

$1,110,334.86  $20,530.15 

The  distribution  of  the  cost  of  paving  was  as  follows : 

Granite  30,521  square  yards,  at  $2.00,  $61,041.44 

Cobble 161,933  square  yards,  at    1.25,  202,415.99 

Brick  8,626  square  yards,  at    1.60,  13,802.14 

Wood   52,731  square  yards,  at    i.oo,  52,730-73 

Total 253,811       square  yards,  $329,990.30 

These  schedules  include  the  $135,952.80  of  pavement  relaid. 

According  to  the  lease  of  May  24,  1886,  the  personal  property 
of  the  North  Chicago  City  Railway  Company  turned  over  to  its 
successor  stands  as  a  charge  against  the  latter  at  the  appraised  value 
agreed  upon,  to-wit:  $489,489.66. 

The  real  estate  and  buildings  existing  at  the  time  of  the  lease, 
representing  an  original  cost  value  of  $245,188.37  and  $418,024.84 
respectively,  have  also  to  be  accounted  for. 

On  the  other  hand,  the  lessee  company  has  expended  for  mis- 
cellaneous improvements  for  account  of  the  lessor  company,  from 


CHICAGO    STREET    RAILWAYS.  99 

May  24,  1886,  to  December  31,  1897,  the  sum  of  $281,562.84  and 
$278,125.00  for  the  Clark  and  Wells  Street  bridges,  for  which  it  is 
entitled  to  credit  under  the  terms  of  the  lease. 

It  has  also  made  the  following  special  expenditures  for  account 
of  the  lessor  company,  viz : 

Lincoln  avenue  power  house  and  machinery $144,550-33 

Clark      street    power  house  and  machinery 135,000.00 

Illinois    street    power  house  and  machinery 200,000.00 

Clark  street  barn 75,000.00 


Total $554,550-33 

To  recapitulate,  there  existed  on  December  31,  1897,  the  fol- 
lowing assets : 

73.329  miles  single  track  road $3,184,280.14 

Real  estate  245,188.37 

Buildings 1,187,440.96 

Personal  property  per  inventory 489,489.66 


Total     $5,106,399.13* 

Sec.  8.— Resume  of  Assets  and  Liabilities. 

The  outstanding  liabilities  on  December  31,  1897,  were  as  fol- 
lows: 

Capital  stock  $500,000.00 

First  mortgage  6  per  cent,  bonds 500,000.00 

Consolidated  4l/2  per  cent,  mortgage  bonds 2,497,000.00 

Due  North  Chicago  Street  Railroad  Company  for  expenditures  for  bet- 
terments     6,172,331.89 


$9,669,331.89 

showing  an  excess  of  $4,562,932.76  over  the  cost  value  of  the  ex- 
isting property. 

As  this  cost  value  is  only  $2,109,399.13  in  excess  of  the  out- 
standing bonds  which  are  the  first  lien  against  the  property,  it  will 
be  seen  that  there  is  a  loss  of  $4,062,932.76  on  the  claim  of  the 
North  Chicago  Street  Railroad  Company,  and  nothing  in  the  way 
of  tangible  property  to  secure  the  stockholders. 

1  In  strict  accordance  with  the  contract,  the  item,  "Personal  property  per  in- 
ventory, $489,489.66,"  is  an  asset,  but  when  ascertaining  the  net  assets  of  both  com- 
panies this  item  should  be  excluded,  as  the  property  is  now  in  the  possession  of  the 
North  Chicago  Street  Railroad  Co.  and  is  included  in  its  assets.  Thus  the  original 
cost  of  the  property  now  actually  possessed  by  the  N.  C.  C.  Ry.  Co.  is  $4,616,909.47. 


100  MUNICIPAL    AFFAIRS. 

EXHIBIT   III— NORTH    CHICAGO    STREET   RAILROAD 

CO. 

Sec.   J.— Early  Operations. 

This  company  was  incorporated  May  18,  1886.  Six  days  later, 
or  on  May  24,  1886,  it  entered  into  an  operating  agreement  or  lease 
with  the  North  Chicago  City  Railway  Company,  the  full  particulars 
of  which  are  given  under  the  head  of  North  Chicago  City  Railway 
Company.  (See  Exhibit  II.,  Sections  i  and  2.)  The  consideration 
to  be  paid  by  the  lessee  company  was  $37,500  on  the  first  day  of 
July,  1886,  and  the  same  amount  quarterly  during  the  continuance 
of  the  agreement,  being  in  the  nature  of  a  guaranteed  dividend  of 
30  per  cent,  per  annum  on  the  capital  stock  of  the  lessor  company 
In  addition,  the  lessee  company  agreed  to  guarantee  the  interest  of 
all  bonds  and  mortgages  of  the  lessor  company  then  existing  or 
which  might  thereafter  be  created,  and  to  pay  a  bonus  of  $500,000 
in  cash  or  capital  stock  of  the  lessee  company. 

One  June  29,  1886,  the  board  of  directors  of  the  North  Chicago 
Street  Railroad  Company  authorized  the  purchase  of  2,501  shares 
of  the  capital  stock  of  the  lessor  company  at  $600  per  share,  or 
$1,500,600  in  the  aggregate,  and,  in  order  to  provide  the  funds  with 
which  to  make  the  purchase,  decided  to  issue  first  mortgage  5  per 
cent,  bonds  dated  July  i,  1886,  in  the  sum  of  $1,500,000,  to  be 
partly  secured  by  the  deposit  in  trust  of  2,501  shares  of  stock  re- 
ferred to.  On  September  16,  1886,  the  bonds,  which  run  to  Will- 
iam L.  Elkins,  were  issued  to  William  L.  Elkins  and  Peter  A.  B. 
Widener,  from  whom  the  2,501  shares  are  presumed  to  have  been 
received  in  exchange  the  same  day. 

Thirteen  months  later,  or  on  November  18,  1887,  the  board 
of  directors  of  the  North  Chicago  Street  Railroad  Company  passed 
a  resolution  reciting  that  "Whereas,  the  stockholders  of  the  said 
North  Chicago  City  Railway  Company  desire  said  payment,"  re- 
ferring to  the  $500,000  bonus  to  be  paid  under  the  lease  or  operat- 
ing agreement  of  May  24,  1886,  "  *  *  *  to  be  made  in  the 
stock  of  this  company  and  not  in  cash ;  resolved,  that  the  Treasurer 
purchase  5,000  shares  and  deliver  the  same." 

According  to  an  official  "History  of  the  Yerkes  System  of 
Street  Railways  in  the  City  of  Chicago,"  page  33,  I  find  the  fol- 
lowing reference  to  this  payment :  "As  a  further  consideration  for 


CHICAGO    STREET    RAILWAYS.  101 

the  lease,   the  stockholders  of  the  North  Chicago   City  Railway 
Company  received  stock  in  the  new  company  to  an  amount  equal 
to  the  par  value  of  their  holdings  in  the  old  company."     As  2,501 
shares  of  the  old  company,  entitling  the  owner  to  a  like  number  of 
shares  in  the  new  company  in  accordance  with  the  above  division, 
were  at  that  time  deposited  with  the  Fidelity  Insurance,  Trust  & 
Safe  Deposit  Company  of  Philadelphia,  in  trust  for  the  benefit  of 
the  North  Chicago  Street  Railroad  Company,  it  would  seem  that 
part  of  the  stock  proposed  to  be  divided  would  revert  to  the  last- 
named  company.     This  was  not  the  case,  however,  notwithsanding 
the  following  entry  in  the  books  of  the  company  under  date  of  June 
15,  1888,  which  shows  that  the  full  $500,000  was  distributed,  viz: 
Operating  agreement  with  North  Chicago  City  Railway  Company,  Dr.-— 
To  cash  United  States  Construction  Company  for  5,000  shares  of 
the  capital  stock  of  North  Chicago  Street  Railroad  Company, 
at  par,  purchased  as   per  resolution   of  Board  of  Directors, 
passed  November  18,  1887,  for  the  purpose  of  issue  to  stock- 
holders holding  dividend  certificates  issued  by  the  North  Chi- 
cago City  Railway  Company  to  its  stockholders  in  lieu  of  the 
$500,000  to  be  paid  them  by  this  company,  as  per  operating 
agreement,  dated  May  24,  1886 $500,000.00 

I  can  find  no  record  in  the  book  of  account  of  the  North 
Chicago  City  Railway  Company  of  the  issue  of  $500,000  in  dividend 
certificates  by  that  company,  although  such  may  have  been  done 
after  the  books  were  turned  over  to  the  lessee  company  on  May  24, 
1886,  and  no  record  made. 

Sec.  2,— Bonds  Issued  as  Dividends. 

In  examining  the  accounts  prior  to  May  24,  1886,  I  find  that 
several  large  dividends  were  paid  in  bonds.  For  example,  in  De- 
cember, 1884,  a  dividend  of  $250,000  was  declared,  payable  in 
bonds,  being  50  per  cent,  on  the  capital  stock  of  the  company.  In 
December,  1882,  another  dividend  of  $250,000  was  declared,  paya- 
ble in  bonds,  and  during  the  same  month  what  purports  to  be  a 
sale  of  $250,000  more  bonds  was  in  reality  another  dividend  of 
$250,000,  making  $750,000  in  dividends  paid  in  bonds.  During 
1882  dividends  amounting  to  107  per  cent,  were  paid. 

Of  the  $1,247,000  bonds  of  the  North  Chicago  City  Railway 
Company  outstanding  at  the  time  of  the  lease  of  the  road  to  the 
North  Chicago  Street  Railroad  Company,  all  but  $497,000  were 


102  MUNICIPAL    AFFAIRS. 

issued  as  dividends  to  stockholders,  and  I  am  of  the  impression 
that  still  another  dividend  in  bonds  was  paid  prior  to  January  I, 
1881,  but,  as  the  first  ledger  of  the  company  cannot  be  found,  al- 
though other  books  of  the  original  set  are  still  in  the  possession  of 
the  lessee  company,  I  am  unable  to  confirm  the  impression,  if  at 
all,  except  by  laborious  work  in  reconstructing  a  new  ledger  from 
such  data  as  I  may  be  able  to  find  in  other  books  and  records. 

The  resolution  of  the  board  of  directors  of  the  North  Chicago 
City  Railway  Company  of  November  2,  1882,  in  reference  to  the 
bond  dividend  of  1882,  authorized  "50  per  cent,  on  capital  stock, 
payable  in  6  per  cent.  $1,000  bonds  and  convertible  certificates  bear- 
ing date  of  November  ist,  1882."  The  bonds  being  for  an  even 
thousand  dollars  each,  it  became  necessary  to  issue  both  bonds  and 
convertible  certificates  to  each  shareholder.  For  example,  L.  S. 
Buckingham  is  charged  with  having  received  $10,000  in  bonds  and 
a  convertible  certificate  for  $800  on  December  4,  1882,  being  50  per 
cent,  of  the  stock  standing  in  his  name,  to-wit :  $21,600.  The  bonds 
issued  were  numbered  i  to  10  inclusive.  Bond  21  went  to  E.  Buck- 
ingham, as  also  bonds  23  to  25,  inclusive.  On  December  5,  1882, 
bonds  26  to  28,  inclusive,  are  recorded  as  having  been  given  to 
Martha  J.  Marble ;  bonds  32  to  34,  inclusive,  and  38  to  Annie  G. 
Moore,  and  39,  40  and  43  to  Julia  F.  Porter.  In  the  same  manner 
250  bonds  were  issued  during  the  month  of  December,  1882,  the 
highest  number  being  471,  issued  to  Mary  H.  Jones  on  December 
30,  1882.  All  of  these  bonds  were  charged  to  dividend  account. 

On  precisely  the  same  dates  during  the  month,  and  to  the  same 
persons,  the  records  show  there  was  sold  for  cash  an  exactly  even 
sum  in  bonds  and  convertible  certificates,  and  the  remarkable  part 
of  it  is  that  every  stockholder  seemed  to  be  of  an  even  disposition 
financially,  immediately  purchasing  an  additional  bond  and  certifi- 
cate for  each  bond  and  certificate  given  to  him  or  her  as  a  dividend. 

There  was  apparently  no  condition  requiring  a  stockholder  to 
purchase  a  $1,000  bond  before  he  could  be  paid  his  dividend  of  that 
amount;  nevertheless  in  the  issue  of  the  500  bonds  there  was  un- 
doubtedly an  understanding  between  the  company  and  the  share- 
holders beforehand  of  some  kind,  as  there  is  no  break  in  the  bond 
numbers  issued  when  the  $250,000  dividend  and  alleged  sale  of 
$250,000  in  bonds  are  taken  together.  For  example,  L.  S.  Buck- 


CHICAGO    STREET    RAILWAYS.  103 

ingham  is  charged  with  receiving  bonds  i  to  10,  inclusive,  and  a 
certificate  for  $800,  on  December  4,  1882,  as  a  dividend,  and  on  the 
same  date  is  credited  with  having  paid  the  company  $10,000  for 
bonds  ii  to  20,  inclusive,  and  $800  for  another  certificate  of  that 
amount.  In  the  same  manner  E.  Buckingham  received  bond  21 
and  a  certificate  for  $700  as  a  dividend,  and  bond  22  and  a  certifi- 
cate, also  for  $700,  in  exchange  for  $1,700  in  cash,  and  so  on 
throughout  the  list  of  shareholders. 

It  is  unfortunate  that  the  ledger  prior  to  January  i,  1883,  is 
missing,  as  it  would  throw  considerable  light  on  the  subject. 

Sec.  3— Stock  Speculations. 

The  original  capital  stock  of  the  North  Chicago  Street  Rail- 
road Company  was  $5,000,000  subscribed  for  as  follows : 

United  States  Construction  Company 49>99°  shares 

C.  T.  Yerkes 2  shares 

Hiram  Crawford 2  shares 

Andrew  Crawford 2  shares 

Win.  D.  Meeker 2  shares 

W.  L.  Elkins 2  shares 

Total 50,000  shares 

This  stock  was  paid  for  entirely  by  the  United  States  Con- 
struction Company,  as  follows:  On  October  15,  1886,  the  board 
of  directors  passed  the  following  resolution: 

WHEREAS,  the  United  States  Construction  Company  has  made  a  demand  for  a 
payment  of  $1,500,000  on  account  of  the  contract  made  between  these  two  com- 
panies on  the  24th  of  May,  1886 ;  therefore  be  it 

RESOLVED,  That  the  said  payment  is  hereby  ordered  and  made  payable  on  the 
25th  day  of  October,  1886. 

On  October  25,  1886,  or  the  date  mentioned,  construction  ac- 
count is  debited  $1,500,000  and  the  above-named  subscribers  cred- 
ited with  having  paid  the  same  aggregate  amount,  or  30  per  cent, 
of  their  subscriptions.  On  January  10,  1887,  another  payment  to 

kthe  United  States  Construction  Company  is  authorized,  amounting 
to  $1,000,000,  and  on  January  12,  1887,  another  credit  amounting 
to  20  per  cent,  is  given  on  the  above  subscriptions.  On  April  n, 
1887,  another  payment  of  $1,250,000  is  ordered  made  to  the  United 
States  Construction  Company,  and,  on  the  same  day,  25  per  cent, 
of  the  stock  subscription  is  credited  to  the  subscribers. 

In  the  meantime,  the  United  States  Construction  Company  had 
undertaken  a  new  contract  for  $750,000,  that  of  January  12,  1887, 


104  MUNICIPAL    AFFAIRS. 

fully  explained  elsewhere,  and  on  August  23,  1887,  received  the 
first  payment  thereon  on  account,  the  funds  with  which  to  make 
the  payment  being  the  proceeds  of  three  notes  negotiated  as  fol- 
lows: 

August  15,  1887,  Commercial  Natonal  Bank $250,000 

August  23,  1887,  Illinois  Trust  &  Savings  Bank 150,000 

August  23,  1887,  C.  T.  Yerkes 100,000 


Total $500,000 

On  November  18,  1887,  another  payment  of  $500,000  was  or- 
dered made  to  the  United  States  Construction  Company  on  ac- 
count of  the  original  cable  contract  of  May  24,  1886,  and  on  No- 
vember 21,  1887,  the  last  two  payments,  aggregating  $1,000,000, 
were  credited  on  the  above  subscriptions,  completing  all  except 
$250,000  due  the  United  States  Construction  Company,  which  last 
amount  was  paid  February  27,  1888,  by  a  final  resolution  of  the 
board  of  directors  authorizing  the  payment  of  a  like  sum  to  the 
Construction  company  in  final  settlement  of  the  contract  of  May 
24,  1886. 

It  will  be  noticed  that  prior  to  January  12,  1887,  only  30%  had 
been  paid  on  account  of  the  capital  stock  and  that  half  of  the  total 
amount  due  remained  to  be  paid  after  that  date;  nevertheless  it 
would  seem  that  the  stock  had  already  been  delivered  to  the  United 
States  Construction  Company,  for,  on  January  12,  1887,  when  the 
second  payment  ($1,000,000)  is  credited  to  the  United  States  Con- 
struction Company  on  account  of  its  subscription,  making  a  total 
of  $2,500,000,  a  dividend  of  2,\  per  cent,  on  $3,000,000,  or  $75,000, 
was  paid  to  George  D.  Widener,  Treasurer  of  the  United  States 
Construction  Company.  Considering  that  only  $1,500,000  had 
been  with  the  company  from  October  25,  1886,  to  the  date  of  the 
dividend,  or  January  12,  1887,  2  months  and  17  days,  the  dividend 
was  actually  at  the  rate  of  24  per  cent,  per  annum  on  the  sum  paid 
in. 

The  dividend  referred  to  was  the  first  one  declared  by  the 
North  Chicago  Street  Railroad  Company  and  amounted  in  the  ag- 
gregate to  $125,000,  or  2\  per  cent,  on  the  entire  capital  stock  of 
the  company.  Another  dividend  of  2,\  per  cent,  was  declared  June 
22,  1887,  and  one  of  3  per  cent.,  or  $150,000,  was  declared  Decem- 
ber 22,  1887,  all  before  the  capital  stock  was  fully  paid  for,  and, 
presumably,  before  any  of  it  had  been  delivered  to  the  subscribers. 


CHICAGO    STREET    RAILWAYS. 


105 


Particular  attention  is  called  to  the  fact  that  it  was  not  until 
June  15,  1888,  that  there  was  any  distribution  of  the  $500,000  in 
stock  of  the  new  company  among  the  stockholders  of  the  old  com- 
pany, and  such  may  have  been  the  case;  nevertheless,  I  find  that 
the  first  dividend  paid  by  the  new  company,  that  of  January,  1887, 
was  distributed  as  follows: 


Being  2& 

Dividends. 

per  cent,  on 

Jan.  u,  1887,  C.  L.  Hutchinson  

$500.00 

$20,000 

an.  12,  1887,  Geo.  D.  Widener,  Treas.  U.  S.  Con.  Co  

75,000.00 

3,000,000 

.  an.  14,  1887,  Chas.  H.  Ferry,  Trustee  

37-50 

1,500 

.  an.  14,  1887,  C.  A.  Spring,  Jr  

50.00 

2,000 

.an.  15,  1887,  Chas.  B.   King   

150.00 

6,000 

an.  15,  1887,  Andrew  Nelson  

1  20.00 

4,800 

.  an.  15,  1887,  Geo.  E.  Adams  

170.00 

6,800 

an.  15,  1887,  Adele  F.  Adams  

67.50 

2,700 

an.  15,  1887,  Nancey  S.  Foster  

250.00 

10,000 

an.  15,  1887,  Julia  F.  Porter  

125.00 

5,ooo 

an.  15,  1887,  S.  M.  James  .  ;  

250.00 

10,000 

an.  15,  1887,  T.  S.  Phillips  

125.00 

5,ooo 

an.  15,  1887,  Mary  H.  Jones  

125.00 

5,ooo 

an.  15,  1887,  Wm.  N.  Phillips  

125.00 

5,ooo 

an.  15,  1887,  Mrs.  Annie  G.  Moore  

125.00 

5,ooe 

an.  17,  1887,  Eliza  V.  Rumsey  

5-00 

200 

an.  17,  1887,  M.    F.   Blair,   Chauncy    J.    Blair,    Cyrus   H. 

Adams,  Trustees  

252.50 

10,000 

',  an.  18,  1887,  Lorenzo  G.  Woodhouse  

62.50 

2,500 

.  an.  20,  1887,  I.  N.  Maynard  

90.00 

3,600 

an.  22,  1887,  Mrs.  R.  McM.  Gillespie  

215.00 

12,600 

an.  25,  1887,  Mrs.  Sarah  Morris  

37-50 

1,508 

an.  26,  1887,  Edward  Waller  

112.5* 

4,500 

an.  27,  1887,  Chas.  T.  Yerkes  

80.00 

3,200 

Jan.  27,  1887,  Hiram  Crawford  
Jan.  27,  1887,  Robt.  Macfeely  
Feb.    i,  1887,  E.  M.  Mayo  

12.50 
137.50 
125.00 

500 

5,5oo 
5,000 

Feb.     i,  1887,  Clara  C.  Hollis  

62.50 

2,500 

Feb.    5,  1887,  P.  A.  B.  Widener  

190.00 

7,600 

Feb.    5,  1887,  W.  L.  Elkins  

192.50 

7,700 

Feb.    5,  1887,  Geo.  D.  Widener,  Treas  

1,230.00 

49,200 

Feb,  25,  1887,  W.  R.   Willing  

77.50 

3,100 

Mch.  12,  1887,  J.  J.  Mitchell,  Pres  

250.00 

10,000 

Mch.  15,  1887,  S.  B.  Cobb  

50.00 

2,000 

Mch.  19,  1887,  Thos.  Howard  

250.00 

10,000 

Mch.  23,  1887,  Chas.  H.  Ferry  

17.50 

700 

Mch,  23,  1887,  Mary  A.  W.  Ferry  

30.00 

1,200 

Apr.  15,  1887,  Robt.  Glendeni-ng  
Apr.  30,  1887,  P.  A.  B.  Widener  

125.00 
2,085.00 

5,000 
83,400 

Apr.  30,  1887,  W.  L.  Elkins  

2,085.00 

83,400 

Apr.  30,  1887,  C.  T.  Yerkes  

2,082.50 

03,300 

May    2,  1887,  U.  S.  Construction  Co  

37,500.00 

1,500,000 

May  27,  1887,  Mary  A.  W.  Ferry,  Trustee  

25.00 

1,000 

.  ulv    i,  1887,  W.  C.  Goudy  

S-oo 

200 

,  uly     I,  1887,  Jno.  Doe  

217.50 

8,700 

.  uly    i,  1887,  Clara  F.  Bass  

67.50 

2,700 

,ruly    I,  1887,  L.  M.  Ferry  

7.50 

300 

Totals $125,000.00       $5,000,000 


106  MUNICIPAL    AFFAIRS. 

As  before  stated,  there  is  no  record  that  any  of  the  capital 
stock  was  distributed  among  the  stockholders  of  the  old  company 
until  June  15,  1888,  and  it  may  be  merely  a  coincidence  that  22  out 
of  the  46  names  in  the  above  list  were  stockholders  in  the  old  com- 
pany, and  held  just  one-half  the  number  of  shares  in  the  old  com- 
pany that  they  are  credited  with  above ;  nevertheless,  the  fact  that 
these  names  appear  at  all  among  the  stockholders  of  the  new  com- 
pany and  receiving  dividends  before  the  stock  was  fully  paid  for, 
and  all  payments  being  made  credited  to  other  persons,  would  in- 
dicate, at  least,  that  the  stock  had  been  issued  prematurely,  and 
was  being  trafficked  in  before  the  United  States  Construction  Com- 
pany had  a  clear  paid-up  title  to  it. 

The  issue  of  the  stock  to  the  United  States  Construction  Com- 
pany before  being  earned  by  the  North  Chicago  Street  Railroad 
may  likewise  have  a  very  important  bearing  in  deciding  the  ques- 
tion as  to  whether  or  not  the  same  thing  was  done  on  the  West 
Chicago  Street  Railroad  Company,  as  may  be  inferred  from  a  con- 
sideration of  that  subject  elsewhere  in  this  report. 

Sec.  4.— Total  Expenditures. 

The  total  expenditures  of  this  company  from  May  24,  1886,  to 
December  31,  1897,  outside  of  operating  expenses,  were  $16,797,- 
520.97,  divided  as  follows: 

For  betterments  on  account  North  Chicago  City  Ry.  Co $7,922,331.89 

For  2,501  shares  of  stock  North  Chicago  City  Ry.  Co 1,500,600.00 

Bonus  paid  to  shareholders  North  Chicago  City  Ry.  Co 500,000.00 

Total  on  account  of  North  Chicago  City  Ry.  Co $9,922,931.89 

Balance  on  its  own  account 6,874,589.08 

Total $16,797,520.97 

The  details  of  its  expenditures  on  its  own  account  are  as 
follows : 

10.713  miles  S.  T.  new  horse  road  at $22,478.26             $240.809.60 

10.713  miles  S.  T.  new  horse  road  converted  into  elec- 
tric road  at 14,428.15               154,567.67 

12.014  miles  S.  T.  new  electric  road  at 20,311.13               244,017.92 

Buildings  448,463.77 

Land 199,958.20 

Equipment 836,651.65 

Car  machinery  (on  hand  Dec.  31,  1897) 13,021.19 

Grip  car  tools,                      "                   1,068.87 

Stationary  registers, 12,590.84 


CHICAGO   STREET   RAILWAYS. 


107 


Horses,                                                       9,820.02 

Supplies,                                                     32,920.81 

Bonds,                                                        1,399,650.00 

Stocks,                                                       10,500.00 

Bills  receivable,                                         1,897,400.00 

Accounts  receivable,                                  221,520.61 

Cash  and  cash  items,                                 554,225.16 

Suspense,                                                   22,092.58 

Railway  expenses  to  Dec.  31,  1897 250,099.41 

Miscellaneous  items  charged  into  construction  account : 

Car  Heaters 8,373.78 

Building  repairs 758.44 

Car  repairs 3,800.00 

Wagon  for  Fire  Apparatus 160.00 

Gas  and  Water  Rent 531.28 

Water  Pipe 67.79 

Patent  Cases 875.00 

Love  Traction  Co 7,656.27 

Discount  on  Bonds 35.315.00 

Frontage 10,679.35 

City  Inspection 1,338.75 

Hose  Bridge  and  Lift 456.10 

Garfield  Barn  fire , 8,036.63 

Contributions   2,000.00 

Chicago  Times 144.00 

Printing  29.81 

Legal  Expenses 2,257.06 

Electric  light 52.80 

Gas  pipe  line 4,260.93 

Wells  Street  improvements 1,980.76 

Horse  depreciation 80,000.00 

Corn  depreciation 6,437.03 

Loan  to  Garden  City  Construction  Co 150,000.00               325,210.78 

Total $6,874,589.08 

The  details  of  the  disbursements  for  buildings  were  as  follows : 

Hpbbie  St.  electric  power  house,  at  Hawthorne  Ave.  and  Hobbie  St....  $377,480.80 

High  Ridge  car  house,  at  N.  Clark  St.,  near  Homan  Ave 6,363.38 

Halsted  St.  car  barn,  at  Lincoln  Ave.,  near  Halsted  St 16,351.68 

La  Salle  Ave.  station 7,857.59 

Graceland  Ave.  car  house 28,675.87 

Sheffield  Ave.  machine  shops 6,041.60 

Lincoln  and  Sheffield  Ave.  waiting  room 5,692.85 

Total $448,46377 

The  pieces  of  land  purchased  by  the  company  between  May  24, 
1886,  and  December  31,  1897,  were  (i)  site  of  Hobbie  Street  power 
house,  (2)  site  of  Halsted  Street  barn,  (3)  site  of  machine  shop  on 
Sheffield  Avenue  north  of  Fullerton  Avenue.  These  pieces  are 
represented  by  the  item,  "Land,  $199,958.20,"  in  the  above 
schedule.  The  company  has  purchased  other  pieces  of  land,  but 
the  sum  paid  in  each  case  is  carried  in  the  cash  balance  of  $554,- 
225.16  as  a  cash  item  on  hand  December  31,  1897.  The  pieces 


108 


MUNICIPAL    AFFAIRS. 


referred  to  are:  Site  High  Ridge  car  house;  one  lot,  Larrabee 
Street;  site  Graceland  Avenue  car  house,  Graceland  and  South- 
port  ;  386  and  390  Dearborn  Avenue ;  Belleplaine  and  Lincoln  Ave- 
nues ;  loop,  Sheffield  and  Lincoln  avenues. 

In  converting  the  10.713  miles  single  track  horse  road  into 
electric  road,  the  old  street  pavement  then  down,  being  practically 
new,  was  relaid.  The  original  cost  value  of  this  pavement  was 
$63,024.36  and  is  incorporated  into  the  total  cost  value  of  the  ex- 
isting 22.727  miles  single  track  electric  road  now  owned  by  the 
N.  C.  S.  R.  R.  Co.  The  detailed  cost  of  this  section  of  road  (22.727 
miles)  is  as  follows : 


Overhead  and  underground  electrical  construction $170,435.81 

Paving    133,702.51 

Rails,  85  Ibs 95,323-63 

Miscellaneous  material  and  labor 62,148.00 


Per  Mile. 

$7,499-31 
5,882.98 
4,194.29 
2,734-55 


Totals $461,609.95  $20,311.13 

The  distribution  of  the  cost  of  paving  was  as  follows: 

Granite,        18,956.36  Sq.  yards,  at  $2.00 $37,912.72 

Wood,          55,386.44  Sq.  yards,  at    i.oo 55,386.44 

Cobble,        32,322.52  Sq.  yards,  at    1.25 40,403.35 


Totals.  ..106,665.32 


$133,702.51 


Sec.  5.— Original  Cost  of  Present  Assets. 


The  cost  value  of  the  property  owned  by  the  North  Chicago 
Street  Railroad  Company  and  existing  on  December  31,  1897,  was 
as  follows: 


22.727  miles  S.  T.  electric  road,  at  $20,311.13 

Real  estate 

Buildings  

Equipment : 

182  Box  cars,  at $900  $163,800 

39  Box  cars,  at 700  27,300 

4  Box  cars,  at 500  2,000 

222  Open  cars,  at 725  80,475 

64  Open  cars,  at 500  32,000 

73  Grip  cars,  at 650  47,450 

141  Box  motor  cars,  at 1,000  141,000 

130  Open  motor  cars,  at 825  107,250 

3  Mail  motor  cars,  at 900  2,700 

16  Sweepers,  at 300  4,800 

11  Snow  plows,  at 400  4,400 

12  Salters,  at     200  2,400 

6  Sprinklers,  at 250  1,500 

29  Other  vehicles,  at 300  8,700 


$461,609.95 
199.958.20 
448,463.77 


625,775.00 


CHICAGO   STREET   RAILWAYS. 


109 


Car  machinery 13,021.19 

Grip  car  tools 1,068.87 

Stationary  registers 12,590.84 

Horses  9,820.02 

Storehouse  supplies 32,920.81 

Wagon  for  fire  apparatus 160.00 

Due  from  Garden  City  Construction  Co 150,000.00 

Cash  and  cash  items 554,225.16 

Bonds : 

N.  Chi.  City  Ry.  tf/2  per  cent $110,000 

N.  Chi.  St.  R.  R.  5  per  cent 10,000 

N.  Chi.  St.  R.  R.  debentures 532,900 

Chi.  Passenger  Ry.  Co 714,000 

First  Regiment 2,000 

Dubuque   Building 4,750 

Times-Herald  25,000 

Garfield   Building 1,000 

1,399,650.00 

Stocks : 

Ferris  Wheel $10,000 

N.  Chi.  St.  R.  R 500 

10,500.00 

Bills  Receivable: 

W.   P.   Nixon,  12/19/91 6,300 

J.  J.  West,  2/14/89 16,000 

Chas.  Henrotin,  4/9/92 40,000 

Ed.  Koch,  10/29/92 15,000 

Electric  Park  Am.  Co.,  5/7/96 50,000 

Columbian  Const'n  Co.,  3/9/97 50,000 

J.  R.  Bickerdike,  7/29/97 10,000 

West  Chi.  St.  R.  R.,  8/31/97 25,000 

n/io/97 100,000 

12/10/97 10,000 

12/10/97 10,000 

12/10/97 15,000 

11/15/97.  • 50,000 

West  Chi.  St  R.  R.  Tunnel  Co 1,500,000 

1,897,400.00 

Accounts  receivable 221,520.61 

Suspense  22,092.58 

Total  $6,o6o,777.o<i 

showing  a  depreciation  of  $813,912.08,  to  which  should  be  added 
$500,000  paid  to  the  stockholders  of  the  North  Chicago  City  Rail- 
way Company,  and  the  $1,500,600  paid  for  the  2,501  shares  of 
stock  of  the  same  company,  since  it  is  shown  elsewhere  that  the 
property  of  that  company  on  December  31,  1897,  was  only  $2,109,- 
399.13  in  excess  of  its  outstanding  bonds,  and  which  excess  is  not 
sufficient  to  secure  the  claim  of  the  North  Chicago  Street  Railway 
Company  for  $7,922,331.89.  The  stock,  therefore,  in  case  of  a 
termination  of  the  lease  and  settlement  between  the  companies 


110  MUNICIPAL    AFFAIRS. 

according  to  the  express  terms  of  the  lease,  has  no  secured  value. 
Adding  the  amount  collectible  from  the  lessor  compamy  ($2,- 
109,399.13)  to  the  cost  value  of  the  other  property  of  the  lessee 
company  ($6,060.777.00)  makes  the  total  assets  of  the  lessor  com- 
pany $8,170,176.13. 

Sec.  6.— Present  Liabilities, 

Against  this  there  are  outstanding  liabilities  as  follows : 

First  mortgage  5  per  cent,  bonds $3,171,000.00 

Debenture  bonds,  6  per  cent 1,260,000.00 

Certificates  of  indebtedness,  6  per  cent 500,000.00 

Real  estate  mortgage  (assumed) 15,000.00 

Bills  payable 2,370,200.00 

Conductors'  and  drivers'  deposits 22,274.00 

Employes'  deposits 42,209.00 

Dividends  unpaid 325.00 

Wages  unpaid 125.22 

Coupons  unpaid 15,515.00 

Accounts  payable 10,946.86 


Total    $7,407,595-08 

leaving  $762,581.05  to  secure  the  $6,600,000  outstanding  capital 
stock  of  the  company. 

Sec.  7.— Stock,  Bonds  and  Dividends. 

The  capital  stock  of  this  company  was  originally  $5,000,000, 
and  the  first  issue  of  bonds  $1,500,000.  The  circumstances  in  re- 
gard to  the  issue  and  disposition  of  these  particular  securities  have 
already  been  fully  set  forth  on  a  preceding  page. 

The  mortgage  under  which  the  bonds  were  issued  provides 
that  additional  bonds  may  be  issued  from  time  to  time  for  new  con- 
struction, but  only  to  the  extent  of  75  per  cent,  of  the  actual  cost 
of  the  new  construction.  Under  this  provision  $227,000  new  bonds 
were  issued  in  1887,  $100,000  in  1888,  $523,000  in  1889,  $63,000 
in  1890  and  $758,000  in  1896,  a  total  of  $3,171,000,  including  the 
original  issue  of  $1,500,000.  These  bonds  are  dated  July  i,  1886, 
mature  January  i,  1906,  and  bear  5  per  cent,  interest. 

By  resolution  of  the  board  of  directors  December  8,  1890, 
there  were  issued  on  January  21,  1891,  $500,000  debentures  ma- 
turing January  i,  1911,  and  bearing  6  per  cent,  interest.  Addi- 
tional debentures  were  issued  in  '95  and  '96,  maturing  January  i, 
1915,  and  bearing  6  per  cent,  interest,  amounting  ki  the  aggregate, 
to  $1,260,000. 


CHICAGO   STREET   RAILWAYS.  Ill 

The  first  lot,  $500,000,  issued  in  1895,  was  used  as  collateral 
security  for  loans  to  the  company.  On  January  15,  1896,  another 
lot,  $210,000,  was  authorized  by  the  board  of  directors,  but  not  for 
immediate  issue.  They  were  "to  be  held  until  officers  think  proper 
to  use  same  in  interests  of  company."  Another  lot,  $550,000,  was 
authorized  December  28,  1895. 

The  first  lot,  issued  in  1895,  was  subsequently  redeemed  and 
was  on  hand,  in  the  vault,  January  i,  1898.  Of  the  $210,000  lot, 
$177,100  were  sold,  the  remainder,  $32,900,  being  also  on  hand 
January  i,  1898.  The  $550,000  lot  was  given  to  the  stockholders 
as  a  dividend  in  1896,  together  with  $550,000  new  stock. 

Prior  to  that  date,  or  on  January  21,  1893,  the  first  increase 
in  the  capital  stock  was  authorized,  being  for  $500,000.  This 
stock  was  sold  to  the  old  stockholders  as  of  record  February  23, 
1893,  at  par.  The  market  value  of  the  new  stock  immediately  after 
its  issue  was  $286  per  share.  Its  issue  at  par  under  the  circum- 
stances was  therefore  equivalent  to  an  extra  dividend  of  18  6-10  per 
cent,  to  the  old  stockholders  on  the  $5,000,000  capital  already 
outstanding. 

On  December  28,  1895,  another  increase  in  the  capital  stock 
was  authorized,  this  time  for  $1,100,000.  At  the  same  meeting  an 
extra  dividend  of  20  per  cent.,  payable  half  in  new  stock  and  half 
in  debentures  maturing  in  1915,  was  declared.  The  remaining 
$550,000  new  stock  authorized  was  sold  to  stockholders  of  record 
January  6,  1896,  at  par.  Immediately  after  the  issue  of  the  new 
stock  its  market  value  was  quoted  on  the  Chicago  Stock  Exchange 
at  $238  per  share  bid. 

The  premium  on  the  $550,000  new  stock  sold,  the  market  value 
of  the  $550,000  given  to  the  old  stockholders,  and  the  $550,000 
debentures  at  par  made  a  total  extra  dividend  of  47  6-10  per  cent, 
on  the  $5,500,000  stock  then  outstanding. 

The  total  of  the  extra  dividends  above  referred  to  was  $3,548,- 
ooo.  The  total  of  the  regular  dividends  paid  to  stockholders  of  the 
North  Chicago  Street  Railroad  Company  was  $5,764,253.50.  The 
dividends  from  May  24,  1886,  to  December  31,  1892,  both  regular 
and  extra,  averaged  6.86  per  cent  per  annum.  From  January  i, 
1893,  to  December  31,  1897,  they  averaged  25.24  per  cent  per  an- 
num, including  the  bonuses  on  new  stock  issued  at  par. 


112  MUNICIPAL   AFFAIRS. 

Under  the  terms  of  the  lease  of  May  24,  1886,  a  guaranteed 
dividend  of  30  per  cent,  per  annum  has  been  paid  on  the  $249.900 
outstanding  stock  of  the  North  Chicago  City  Railway  Company. 
The  first  payment  of  this  character  was  made  July  i,  1886,  and 
quarterly  thereafter.  The  total  to  December  31,  1897,  is  $822,670. 

The  aggregate  profit  received  by  the  stockholders  of  both 
companies  from  May  24,  1 886,  to  December  31,  1897,  is  $10,- 
134,923.50. 

The  total  assets  of  both  companies  on  December  31,  1897, 
were  $17,339,508.02,  and  the  total  liabilities,  exclusive  of  capital 
stock,  $16,576,926.97,  leaving  net  assets  of  only  $762,581.05  to  rep- 
resent $7,100,000  capital  stock. 

Upon  this  small  surplus,  dividends,  amounting  to  $866,913, 
were  paid  in  1897,  being  at  the  rate  of  113.68  per  cent,  per  annum. 

The  bonded  and  mortgage  debt  of  the  companies  was  $7,943,- 
ooo,  upon  which  the  annual  interest  charge  is  $407,415,  as  follows: 

North  Chi.  City  Ry $500,000,  at  6%  $30,000 

North  Chi.  City  Ry 2,497,000,  at  4^%  112,365 

North  Chi.  St.  R.  R 3,171,000,  at  5%  158,550 

North  Chi.  St.  R.  R 1,775,000,  at  6%  106,500 

Totals  $7,943,ooo,  at  5.13%  $407,415 

The  North  Chicago  Street  Railroad  Company  has  also  out- 
standing $2,434,683  other  interest  bearing  debt,  but  the  interest 
paid  by  the  company  on  this  debt  is  more  than  offset  by  the  interest 
received  on  $3,307,550  interest  earning  securities  owned  by  the 
company.  As  the  interest  thus  received  is  credited  to  the  same 
account  as  that  to  which  the  interest  paid  out  is  charged,  the  net 
balance  of  this  account  only  appears  in  the  annual  statements  as  a 
charge  against  the  earnings. 

The  net  balance  for  1897  was  $196,824.52,  which  is  at  the  rate 
of  10.9  per  cent,  per  annum  on  the  proceeds  of  bonds  actually 
invested  in  the  plant  of  the  company.  For  example,  the  total 
assets  of  the  company  on  December  31,  1897,  were  $8,170,176.13, 
of  which  $554,225.16  was  cash  and  cash  items,  $5,810,562.32  bonds, 
stocks,  notes  and  open  accounts,  and  the  balance  ($1,805,388.65) 
plant,  or  track,  real  estate,  buildings  and  equipment  used  in  the 
operation  of  the  road.  These  assets  represent  the  proceeds  of 
$4,931,000  bonds,  $2,449,683  miscellaneous  interest  bearing  debt, 
and  $789,493.13  non-interest  debt. 


CHICAGO   STREET   RAILWAYS.  113 

As  the  cost-value  of  the  plant  represents  only  $1,805,388.65 
of  the  total  capital  employed,  it  follows  that  the  net  interest  of 
$196,824.52  paid  out  in  1897  is  for  the  use  of  only  that  portion  of 
the  capital,  and  that  income  derived  from  the  investment  of  the 
remaining  capital  should  at  least  set  off  the  interest  paid  out  for  its 
use.  This,  it  will  be  seen,  is  practically  the  case  when  the  cost  of 
the  plants  of  both  the  lessee  and  the  lessor  companies  are  consid- 
ered jointly. 

The  capital  represented  by  the  joint  plants  is  $6,422,298.12 
and  the  total  net  interest  paid  out  in  1897  was  $337,895.61,  or  £.26 
per  cent,  on  the  cost  value  of  the  plants.  By  reference  to  the 
schedule  on  a  preceding  page,  showing  the  interest  rate  of  the 
bonds  outstanding,  it  will  be  seen  that  the  average  is  5.13  per  cent 
per  annum,  or  very  nearly  the  same  as  the  rate  actually  paid  for  the 
use  of  the  capital  invested  in  the  plants. 

The  net  income  from  the  operation  of  the  plants  in  1897,  after 
the  payment  of  all  expenses,  including  the  interest  charges  above 
referred  to,  was  $1,118,026.99,  or  17.41  per  cent,  on  the  cost  value 
of  the  plants.  The  gross  earnings  were  $2,836,522.41,  or  44.17  per 
cent,  on  the  cost  value  of  the  plant. 

Sec.  8.— Mileage  of  North  Side  Lines. 

The  mileage  of  the  North  Chicago  City  Railway  Company 
and  the  North  Chicago  Street  Railroad  Company  is  summarized 
as  follows: 

Miles  S.  T. 

NORTH  CHICAGO  CITY  RAILWAY. 

Original  horse  road  at  date  of  lease,  May  24,  1886 44774 

New  horse  road,  built  since  May  24,  1886 23.067 

Now  cable  road,  built  since  May  24,  1886 1.862 

New  electric  road,  built  since  May  24,  1886 3.626 

NORTH  CHICAGO  STREET  RAILROAD. 

New  horse  road,  built  since  lease  of  May  24,  1886 

New  electric,  built  since  May  24,  1886 


Total  96.056 

Changes  made  in  the  above  roads  since  their  construction  are 
as  follows: 


NORTH    CHICAGO   CITY  RAILWAY. 


Original  road  as  it  existed  on  May  24,  1886,  afterward  converted  into 

cable  road 16.448 


114  MUNICIPAL    AFFAIRS. 

Original  road  as  it  existed  on  May  24,  1886,  and  afterward  converted  into 

electric  road 28.173 

Original  horse  road  still  remaining  on  December  31,  1897 0.153 

New  horse  road,  built  since  lease  of  May  24,  1886,  afterward  converted 

into  electric  road 22.280 

New  horse  road,  built  since  lease  of  May  24,  1886,  and  still  remaining 

as  horse  road  on  Dec.  31,  1897 0.787 


Total  changes  in  road 67.841 

Add  new  extensions  since  May  24,  1886. 

Cable  road 1.862 

Electric  road 3.626 


Present  mileage   (Dec.  31,  1897) 73-329 

NORTH  CHICAGO  STREET  RAILROAD. 

Original  horse  road  built  by  lessee  company,  afterward  converted  into 

electric  road 10.713 

Add  extensions  electric  road 12.014 


Total  extensions  and  present  mileage 22.727 

RECAPITULATION. 

North  Chicago  City  Ry.,  present  mileage 73-329 

North  Chicago  St.  R.  R.,  present  mileage 22.727 


Total  96.056 

distributed  as  follows: 

Feet, 
Lineal  Feet   Single  Track.  Miles  S.T. 

Cable  road 50,521                96,678  18.310 

Electric  road 211,916.95         405,521.2  76.806 

Horse  road 3,570-5               4,960.9  0.940 


266,008.45          507,160.1  96.056 


EXHIBIT  IV.— CHICAGO  PASSENGER  RAILWAY  CO. 

Sec.  J.— Agreements  with  W.  C.  S.  R.  R.  Co. 

This  company  was  incorporated  February  12,  1883.  At  the 
time  of  the  lease  of  the  Chicago  West  Division  Railway  Co.,  Octo- 
ber 20,  1887,  its  outstanding  capital  stock  was  $1,000,000,  divided 
into  10,000  shares  of  $100  each,  7,300  of  which  were  owned  by  the 
Chicago  West  Division  Railway  Co.  These  shares  cost  the  Chi- 
cago West  Division  Ry.  Co.  $850,850,  or  $116.83  per  share,  and 


CHICAGO    STREET    RAILWAYS.  115 

were  conveyed  to  the  West  Chicago  Street  Railroad  Co.  under  the 
lease  of  October  20,  1887.  There  were  also  outstanding  at  the 
time  of  the  lease  $400,000,  6  per  cent,  bonds. 

The  mileage  of  the  road  on  October  20,  1887,  consisted  of 
29.79  miles,  of  single  track  horse  railroad. 

On  November  16,  1888,  this  company  entered  into  an  agree- 
ment with  the  West  Chicago  St.  R.  R.  Co.  for  the  mutual  use  of 
each  other's  tracks.  Among  other  stipulations  being  the  follow- 
ing, viz.: 

The  Chicago  Passenger  Ry.  Co.  to  construct  a  double-track 
cable  railroad  on  Desplaines  St.  between  Washington  St.  and 
Austin  Ave. ;  on  Washington  St.  from  Desplaines  St.  through  the 
Washington  St.  tunnel  to  Franklin  St. ;  single  track  on  Franklin 
St.  to  Madison  St.  from  Washington  St.,  and  single  track  on 
Washington  St.  from  State  St.  to  Franklin  St. 

West  Chicago  St.  R.  R.  Co.  to  use  the  above  named  tracks  in 
common  with  the  Chicago  Passenger  Ry.  Co.,  and  as  considera- 
tion to  pay  to  the  Chicago  Passenger  Ry.  Co.  the  entire  cost  of  the 
construction  and  also  5  per  cent,  per  annum  upon  the  amount 
which  shall  be  paid  out  by  the  Chicago  Passenger  Ry.  Co.  in  re- 
building and  repaving  the  Washington  St.  tunnel. 

West  Chicago  St.  R.  R.  Co.  to  provide  for  the  traction  of  the 
cars  of  the  Chicago  Passenger  Ry.  Co.  through  the  tunnel  and 
around  the  loop  and  charge  therefor  a  reasonable  sum  to  be  agreed 
upon. 

The  contract  to  continue  for  50  years.  But  on  March  15, 
1889,  this  contract  was  amended  as  follows: 

The  West  Chicago  St.  R.  R.  Co.  stipulates  to  construct  the 
cable  roads  mentioned  with  the  exception  that  the  double  track  on 
Desplaines  St.  shall  be  from  Washington  St.  to  Milwaukee  Ave. 
instead  of  to  Austin  Ave.  The  cost  and  expense  of  construction  of 
tracks,  excepting  the  cable  tracks  covered  by  said  agreement  of 
November  16,  1888,  as  herein  modified,  and  the  cost  and  expense 
of  all  the  permanent  improvements  and  extensions  provided  for 
in  this  agreement,  shall  be  paid  for  in  the  following  manner: 

The  said  Passenger  Ry.  Co.  shall  issue  its  bonds,  interest  not 
to  exceed  6  per  cent.,  to  an  amount  sufficient  to  fund  the  floating 
indebtedness  of  said  Passenger  Ry.  Co.,  and  to  pay  for  the  im- 


116  MUNICIPAL   AFFAIRS. 

provements  which  said  Passenger  Ry.  Co.  has  constructed  to  make 
or  is  under  obligation  to  make,  and  also  such  bonds  as  it  shall  be 
necessary  to  issue  to  pay  for  any  construction,  permanent  improve- 
ments or  extensions,  which  shall  be  made  for  said  Passenger  Ry. 
Co.  by  said  Street  Railroad  Co.  under  this  agreement,  and  from  the 
proceeds  of  the  sale  of  said  bonds  the  Passenger  Ry.  Co.  shall  fund 
all  its  floating  indebtedness  and  also  pay  the  Street  Railroad  Co. 
for  all  construction,  permanent  improvements  or  extensions,  sav- 
ing the  construction  of  cable  tracks  specified  in  said  agreement  of 
November  16,  1888. 

The  agreement  of  November  16,  1888,  was  also  modified  to  re- 
lease the  Chicago  Passenger  Ry.  Co.  from  the  obligation  to  pay 
for  the  traction  of  its  cars  and  also  to  release  the  West  Chicago 
St.  R.  R.  Co.  from  the  payment  of  5  per  cent,  per  annum  of  the  cost 
to  rebuild  and  repair  the  Washington  St.  tunnel,  because  the  Chi- 
cago Passenger  Ry.  Co.  was  to  pay  for  the  improvements  by  the 
issue  of  its  bonds  and  the  West  Chicago  St.  R.  R.  was  to  guaran- 
tee the  interest  on  the  same. 

In  consideration  for  these  modifications  the  West  Chicago  St. 
R.  R.  Co.  stipulates  to  pay  the  Chicago  Passenger  Ry.  Co.  $25,000 
semi-annually,  being  5  per  cent,  on  the  outstanding  capital  stock. 

The  agreement  also  stipulated  that  the  West  Chicago  St.  R.  R. 
Co.  was  to  receive  the  gross  receipts  and  pay  all  the  operating  ex- 
penses of  the  Chicago  Passenger  Ry.  Co.  from  March  15,  1889. 

Sec.  2. — Operations  under  Agreements. 

On  June  8,  1889,  the  Chicago  Passenger  Ry.  Co.  decided  to  is- 
sue $1,000,000  6  per  cent,  consolidated  mortgage  bonds,  $400,000 
to  be  set  aside  to  redeem  the  1st  mortgage  bonds  for  the  same 
amount  then  outstanding.  The  balance  was  disposed  of,  but  in 
what  manner  I  have  been  unable  to  learn,  except  that  part  were 
sold  by  the  West  Chicago  St.  R.  R.  Co.  and  the  proceeds,  $70,- 
309.75,  applied  in  part  payment  of  $104,737.66  due  the  West  Chi- 
cago St.  R.  R.  Co.  for  betterments  down  to  December  31,  1894, 
the  balance  ($34,426.91)  being  carried  forward  until  May  9,  1896, 
when,  with  other  accumulations  on  account  of  betterments,  an- 
other settlement  was  made  by  arbitration,  referred  to  more  partic- 
ularly further  on. 


CHICAGO    STREET    RAILWAYS.  117 

On  July  i,  1890,  both  the  Chicago  West  Division  Ry.  Co.  and 
the  West  Chicago  St.  R.  R.  Co.  "relinquished  all  control  and 
direction  of  the  7,300  shares  of  stock  of  the  Chicago  Passenger  Ry. 
Co.,  leaving  the  same  in  the  hands  of  trustees  for  the  use  and 
benefit  of  the  stockholders  of  this  company,  so  far  as  their  interests 
may  appear,  as  individuals,  etc.,"  and  on  July  14,  1890,  Mr.  Yerkes 
was  "requested  to  accept  the  trust  hereby  created." 

These  were  the  7,300  shares  specifically  included  in  the  sched- 
ule of  property  to  be  turned  over  to  the  West  Chicago  St.  R.  R. 
Co.  at  the  time  of  its  lease  of  the  Chicago  West  Division  Ry.  Co. 
as  part  of  the  property  of  the  last  named  company.1 

On  May  14,  1888,  the  president  of  the  West  Chicago  St.  R.  R. 
Co.  was  authorized  to  guarantee  all  contracts  which  may  be  made 
by  the  Chicago  Passenger  Ry.  Co.  with  the  U.  S.  Construction  Co. 
I  have  not  been  able  to  learn  to  what  this  refers  unless  to  the 
construction  of  the  original  cable  system  on  such  streets  as  the 
Chicago  Passenger  Ry.  Co.  and  not  the  West  Chicago  St.  R.  R.  Co. 
was  specifically  authorized  by  ordinance  to  use. 

The  joint  agreement  of  November  16,  1888,  specifically  re- 
quires the  Chicago  Passenger  Ry.  Co.  to  construct  the  cable  sys- 
tem on  Desplaines  St.,  Washington  St.  and  through  the  Washing- 
ton St.  tunnel,  etc.,  etc.,  but  provides  that  the  West  Chicago  St. 
R.  R.  Co.  shall  pay  the  entire  cost. 

The  amended  agreement  of  March  15,  1889,  confirms  this  stip- 
ulation but  also  recites  that  the  Chicago  Passenger  Ry.  Co.  shall 
issue  its  bonds  "to  pay  for  the  improvements  which  said  Passenger 
Ry.  has  contracted  to  make  or  is  under  obligation  to  make,  and  also 
such  bonds  as  it  shall  be  necessary  to  issue  to  pay  for  any  con- 
struction, permanent  improvements  or  extensions  which  shall  be 
made  for  said  Passenger  Ry.  Co.  by  said  Street  R.  R.  under  this 
agreement." 

Not  having  been  able  to  gain  access  to  the  books  of  the  Chi- 
cago Passenger  Ry.  Co.  or  of  the  U.  S.  Construction  Co.,  I  am 

1  As  a  matter  of  fact,  they  never  were  actually  in  possession  of  the  West  Chi- 
cago St  R.  R.  Co.,  having  been,  by  express  resolution  of  the  Board  of  Directors  of 
that  company  on  November  29,  1887,  delivered  direct  to  Mr.  Yerkes  by  the  Chicago 
West  Division  Ry.  Co. — at  least  7,270  shares  were  so  delivered,  the  remaining  30 
shares  being  delivered  "to  such  person  or  persons  as  Mr.  Yerkes  may  name."  On 
December  14,  1887,  it  was,  however,  decided  that  Mr.  Yerkes  should  hold  the  entire 
7,300  shares. 


118  MUNICIPAL   AFFAIRS. 

unable  to  state  what,  if  any,  improvements  were  made  to  the 
property  of  the  former  company  independent  of  such  as  were 
made  by  the  West  Chicago  St.  R.  R.  Co.  and  appear  on  the  books 
of  the  latter  company,  but  some  obligation  of  that  character  seems 
to  be  referred  to  in  the  joint  agreement. 

On  February  26,  1892,  the  Chicago  Passenger  Ry.  Co.  pur- 
chased Lot  7,  B.  47,  Original  Town  of  Chicago,  with  improve- 
ments thereon,  from  C.  T.  Yerkes  and  J.  B.  Parsons  for  $100,000, 
which  sum  was  paid  over  to  the  West  Chicago  St.  R.  R.  Co.,  and 
that  company  assumed  the  mortgage  of  $10,000,  which  then  ex- 
isted on  the  property.  A  lease  of  this  property  for  99  years  had 
previously  been  secured  by  the  West  Chicago  St.  R.  R.  Co. 

On  March  19,  1896,  the  directors  of  the  Chicago  Passenger 
Ry.  Co.  and  the  West  Chicago  St.  R.  R.  Co.  were  unable  to  come 
to  an  agreement  as  to  the  amount  due  the  former  for  betterments 
made  on  account  of  the  latter  Company,  and  decided  to  refer  the 
matter  to  Geo.  A.  Yuille  and  M.  C.  McDonald  as  arbitrators.  On 
May  9,  1896,  the  arbitrators  reported  the  amount  due  $789,990.07, 
as  follows : 

I2th  St.,  East  of  California  Ave $48,650.39 

East  Harrison   St 2,950.40 

Electrical  construction  197,484.33 

Track  and  paving  194,495.45 

Cable  and  conduits  96,409.50 

Prpportion  of  Western  Ave.  power  house 250,000.00 

Total $789,990.07 

All  these  improvements  were  made  between  January  i,  1896, 

and  the  date  of  the  report,  and  were  therefore  of  an  electrical 

character. 

Sec.  3.— Stock  and  Bond  Issues. 

In  the  anticipation  of  this  settlement  the  directors  of  the  Chi- 
cago Passenger  Ry.  Co.  had,  on  March  3,  1896,  voted  to  increase 
the  capital  stock  from  $1,000,000  to  $2,000,000,  and  on  April  8, 
1896,  the  two  companies  entered  into  an  agreement  that  if  the 
Chicago  Passenger  Ry.  Co.  would  sell  the  new  stock  and  apply 
the  proceeds,  so  far  as  necessary,  towards  reimbursing  the  West 
Chicago  St.  R.  R.  Co.  for  the  above  disbursements,  then  the  lat- 
ter company  would  undertake  to  pay  to  said  Chicago  Passenger 
Ry.  Co.,  or  to  distribute  the  same  among  the  respective  share- 
holders of  said  increased  capital  stock,  $25,000  on  the  I5th  day  of 


CHICAGO    STREET    RAILWAYS.  119 

September,  1896,  and  semi-annually  thereafter  on  the  i$th  days  of 
March  and  September  of  each  and  every  year  a  like  amount  of 
$25,000,  payments  to  continue  for  the  same  period  as  payments  of 
a  like  amount  and  for  the  same  purpose  mentioned  in  the  amended 
agreement  of  March  15,  1889,  the  purpose  being  to  guarantee  a 
uniform  annual  dividend  of  5  per  cent,  on  the  entire  issue  of  $2,- 
000,000,  including  the  new  issue  of  $1,000,000,  of  capital  stock  of 
the  Chicago  Passenger  Ry.  Co. 

The  West  Chicago  St.  R.  R.  Co.  undertook  to  float  the  new 
stock,  but  notwithstanding  the  guaranteed  5  per  cent,  dividend 
there  was  apparently  no  market  for  it,  only  1,163  shares  being 
disposed  of  at  seventy-five  cents  on  the  dollar,  or  for  an  aggregate 
of  $87,225  cash. 

This  apparently  lead  the  directors  of  the  Chicago  Passenger 
Ry.  Co.  to  decide  upon  the  issue  of  more  bonds  with  which  to 
pay  their  debt  to  the  West  Chicago  St.  R.  R.  Co.,  for  on  March  29, 
1897,  a  new  Consolidated  mortgage  for  $2,000,000,  bearing  5  per 
cent,  interest,  was  authorized,  $400,000  being  set  aside  to  retire  the 
outstanding  ist  mortgage  6  per  cent,  bonds  for  the  same  amount, 
and  $600,000  being  set  aside  to  retire  the  outstanding  6  per  cent, 
consolidated  mortgage  bonds  of  June  8,  1889.  Of  the  remaining 
bonds,  $734,000  was  paid  over  to  the  West  Chicago  St.  R.  R.  Co. 
as  a  partial  settlement  of  the  claim  of  the  latter  company  under 
the  award  of  the  arbitrators  of  May  9,  1896. 

As  before  stated,  only  $70,309.75  of  the  proceeds  of  the  $600,- 
ooo  6  per  cent,  consolidated  mortgage  bonds  of  June  8,  1889,  were 
received  by  the  West  Chicago  St.  R.  R.  Co.  In  what  way  the  bal- 
ance was  disposed  of  I  am  unable  to  say,  except  that  $100,000  was 
paid  for  Lot  7,  Block  47,  Original  Town  of  Chicago,  as  before 
stated,  although  the  amended  agreement  of  March  15,  1889,  re- 
quired that  ''the  said  Passenger  Ry.  shall  issue  its  bonds,  interest 
not  to  exceed  6  per  cent.,  to  an  amount  sufficient  to  fund  the 
floating  indebtedness  of  said  Passenger  Ry.  Co.,  etc.,"  which 
would  seem  to  indicate  the  manner  in  which  the  bonds  were  dis- 
posed of,  although  it  is  very  probable  that  some  of  them  were  used 
to  divide  the  accumulated  surplus  of  the  company  among  the  old 
stockholders  at  the  date  of  the  agreement  of  March  15,  1889,  as 
was  done  in  the  case  of  the  Chicago  West  Division  Ry.  Co.  at  the 
time  of  its  lease  to  the  West  Chicago  St.  R.  R.  Co. 


120  MUNICIPAL    AFFAIRS. 

The  company  experienced  the  same  difficulty  in  substituting 
its  $600,000  5  per  cent,  bonds  for  the  outstanding  6  per  cent,  bonds 
for  the  same  amount  as  in  floating  the  new  stock,  and  was  obliged 
to  issue  $224,000  of  the  new  stock  as  a  bonus  to  secure  the  retire- 
ment of  the  old  6  per  cent,  consolidated  bonds. 

On  April  12,  1897,  the  directors  of  the  West  Chicago  St.  R.  R. 
Co.  passed  a  resolution  guaranteeing  the  principal  and  interest  of 
the  $2,000,000  5  per  cent,  consolidated  bonds  of  the  Chicago  Pas- 
senger Ry.  Co.  of  the  issue  of  March  29,  1897,  and  on  the  same 
date,  by  mutual  agreement,  the  term  of  the  lease  of  March  15,  1889, 
was  extended  50  years  from  March  14,  1904,  making  the  full  term 

65  years. 

Sec.  4.— Original  Cos        Assets. 

As  the  books  of  that  company  are  inaccessible,  the  actual  cost 
of  construction  is  likewise  unobtainable,  but  the  approximate  cost 
may  be  obtained  in  connection  with  the  outstanding  capital  stock 
and  bonds  of  the  company  on  November  16,  1888,  which  were: 
Capital  stock,  $1,000,000;  ist  mortgage  bonds,  $400,000;  total, 
$1,400,000. 

After  the  lease  of  this  road  by  the  West  Chicago  Street  R.  R. 
Co.,  the  latter  company  built  4.40  miles  of  additional  single  track 
horse  railroad  at  a  cost  of  $104,737.66,  or  $23,825.68  per  mile.  At 
the  same  rate  per  mile  the  cost  of  29.79  miles  would  be  $709,767.01, 
which  would  leave  $690,232.99,  less  $29,030,  for  37  horse-cars 
known  to  have  been  turned  over  to  the  West  Chicago  St.  R.  R.  Co., 
to  represent  the  other  property  turned  over  under  the  lease,  in- 
cluding the  real  estate  and  buildings. 

During  1888  and  1889,  3.15  miles  of  the  original  mileage  were 
converted  into  cable  road,  the  estimated  cost  of  which  is  given  else- 
where, 0.075  miles  were  transferred  to  the  Chicago  City  Ry.  Co. 
and  28.585  miles,  including  the  4.40  miles  built  by  the  West  Chi- 
cago St.  R.  R.  Co.,  were  converted  into  electric  road. 

There  remains  of  the  original  horse  railroad  2.38  miles,  rep- 
resenting a  cost  value  of  $56,705.12,  or  $23,825.68  per  mile. 

The  cost  to  convert  the  28.585  miles  of  horse  railroad  into  elec- 
tric road  was  as  follows: 

2.01  miles  at  $24,204.17  per  mile $48,650.39 

26.575  miles  at  $i8,573-46  per  mile 493.58g.68 

Total. .  $542,240.07 


CHICAGO   STREET   RAILWAYS.  121 

The  track  and  paving  of  26,575  miles  cost  at  $7.31875  per  mile1  .........  194,495.45 

Electrical  construction  26.575  miles  at  $7.431.21  per  mile  ................  197,484.33 

Cable  and  conduits,  28.585  miles  at  $3,372.76  per  mile  ................  ....     96,409.50 

Miscellaneous,  26.575  miles  at  $195.87  per  mile  ........................      5,200.40 

Proportionate  cost  of  Western  Ave.  power  house  was  $250,000,  or  $8,745.85  per 
mile,  for  28.585  miles  of  single  track. 

The  total  cost  of  the  Western  Ave.  power  house  was  $520,- 
455-65.  The  proportion  charged  to  the  Chicago  Passenger  Ry.  Co. 
($250,000)  was  the  amount  agreed  upon  by  the  arbitrators  in  their 
report  of  May  9,  1896.  This  amount  seems  too  high  for  the  follow- 
ing reasons: 

The  total  mileage  of  electric  roads  on  the  West  Side  is  173.73  miles  single 
track,  including  the  28.585  miles  of  Chicago  Passenger  Ry.  single  track  referred 
to  above.  The  mileage  on  the  North  Side  is  147.07  single  track.  The  total  mile- 
age of  all  three  roads  is  320.8  miles  single  track. 

The  power  to  operate  these  roads  is  obtained  from  three  different  power 
houses,  viz:  Western  Ave.,  California  Ave.  and  Hawthorne  Ave.,  but  without 
respect  to  the  particular  company  to  whom  the  power  houses  belong,  the  California 
Ave.  power  house,  for  example,  furnishing  power  to  the  North  and  West  Side 
lines  as  well  as  to  the  Chicago  Electric  Transit  Co.,  to  which  company  it  belongs. 
On  the  other  hand,  the  power  houses  at  Western  Ave.  on  the  West  Side  and  Haw- 
thorne Ave.  on  the  North  Side  supply  power  to  other  roads,  the  total  mileage  sup- 
plied altogether  by  these  two  power  houses  being  greater  than  the  combined 
mileage  of  the  North  Chicago  St.  R.  R.  Co.  and  the  West  Chicago  St.  R.  R.  Co., 
including  that  of  the  Chicago  Passenger  Ry.  and  Chicago  West  Division  Ry.  com- 
panies, to-wit:  320.8  miles  single  track. 

The  cost  of  Western  Ave.  power  house,  exclusive  of  the  land  on  which  it  is 
built,  which  was  formerly  the  site  of  the  car  shops  of  the  Chicago  West  Division 
Ry.  Co.,  and  conveyed  to  the  West  Chicago  St.  R.  R.  Co.  under  the  lease  of 
October  20,  1887,  was  $520,455.65,  as  heretofore  stated,  $155,535-55  for  the  building 
and  $364,920  for  the  machinery.  The  cost  of  the  Hawthorne  Ave.  power  house, 
including  the  land  and  machinery,  was  $377,480.80.  Total  for  both  $897,936.45,  or 
$2,800  per  mile.  Even  if  an  estimate  of  $150,000  is  placed  upon  the  126.4x2,219.6 
ft.  of  land  upon  which  the  Western  Ave.  power  house  stands  and  added  to  the 
total  cost  the  cost  per  mile  of  electric  single  track  is  not  increased  $500,  so  that 
the  first  cost  of  $8,745.85  per  mile  for.  28.585  miles  of  single  track  given  above 
is,  therefore,  unreliable  as  a  basis  for  computing  the  cost  per  mile,  as  it  seems 
entirely  out  of  proportion  to  the  total  mileage  operated. 

Of  the  original  $814,504.67  first  cost  of  the  29.79  miles  single 
track  horse  railroad  existing  at  the  time  of  the  lease  and  of 


1  The  lineal  feet  of  street  covered  by  the  28.585  miles  of  track  is  64,627 
feet  and  the  square  yards  of  street  paving  amount  to  114,892.4,  divided  as  follows: 
Granite,  15,194.7;  cedar,  11,946.6;  oak,  11,164.4;  cobble,  76,586.7. 

The  average  cost  per  square  yard,  new,  has  been  :  Granite,  $2  ;  cedar,  $i  ;  oak. 
$2,  and  cobble,  $1.25. 

Exactly  how  many  square  yards  of  new  paving  is  represented  in  the  item  of 
$194,495.45  for  track  and  paving,  I  am  unable  to  state,  but  if  the  114,892.4  square 
yards  of  street  were  laid  new  and  at  the  rates  named  the  total  cost  would  have 
been  $217,828,  or  at  the  rate  of  $17,796.41  per  lineal  mile. 


122  MUNICIPAL    AFFAIRS. 

4.40  miles  built  subsequently,  there  remains  2.38  miles,  which  cost 
$56,705.12,  leaving  $757,799-55  to  represent  depreciation  in  cost 
value  because  of  the  subsequent  charge  to  to  construction  ac- 
count of  the  cost  to  construct  and  entirely  distinct  and  different 
kind  of  road  in  its  place,  all  of  the  cost  of  the  old  road  being  prop- 
erly chargeable  to  profit  and  loss. 

Of  the  3.15  miles  of  single-track  horse  railroad  converted  into 
cable  road,  all  but  0.314  of  a  mile,  forming  part  of  the  State  St. 
loop  extension,  was  reconstructed  by  the  U.  S.  Construction  Co., 
and  the  whole  was  to  be  paid  for,  under  the  lease,  by  the  West  Chi- 
cago St.  R.  R.  Co.,  as  part  of  the  consideration  to  be  paid  by  the 
lessee  company.  For  reasons  that  will  be  apparent,  however,  it  is 
necessary  to  consider  the  cost  of  reconstructing  the  2.836  miles  in 
connection  with  the  cost  of  constructing  the  entire  cable  system. 

As  elsewhere  stated,  the  cost  per  mile  of  the  Blue  Island  Ave. 
and  Halsted  cable  road  was  $96,455.43,  and  it  is  fair  to  presume, 
in  the  absence  of  any  definite  information  to  the  contrary,  that  the 
construction  having  been  done  at  very  nearly  the  same  time,  the 
2.856  miles  was  built  at  approximately  the  same  cost  per  mile,  or 
an  aggregate  of  $273,547.60. 

The  34.115  miles  single-track  railroad  existing  on  November 
31,  1897,  represented,  therefore,  a  total  investment  of  $1,677,- 
411,29,  as  follows: 

2.836  miles  single  track  cable  $273,547.60 

0.314  miles  single  track  cable  43,715-51 

2.38    miles  single  track  horse  railroad  56,705.12 

28.585  miles  single  track  electric  railroad 542,240.07 

Real  estate  and  buildings 761,202.99 

Total ....$1,677,411-29 

Sec.  5.— Liabitttiei  at  Present. 

Against  this  there  was  outstanding  on  December  31,  1897: 

First  mortgage  6  per  cent,  bonds $400,000.00 

Consolidated  5  per  cent,  bonds 1,334,000.00 

Capital  stock  ! 1,340,300.00 

Due  West  Chicago  St  R.  R 49,158.49 

Total $3,123,458.49 

showing  outstanding  liabilities  in  excess  of  the  cost  value  of  the 
property  to  the  extent  of  $1,446,047.20. 

A  reappraisement  of  the  real  estate  of  this  company  will  doubt- 
less reduce  this  excess  to  a  considerable  extent,  as  I  understand  its 


CHICAGO    STREET    RAILWAYS.  123 

fair  market  value  is  greater  than  the  oustanding  bonds  of  the  com- 
pany. 


EXHIBIT  V.— CHICAGO  WEST  DIVISION  RAILWAY  CO. 

Sec.  J.— Early  Operations. 

This  company  was  incorporated  February  21,  1861.  On  Oc- 
tober 29,  1887,  its  board  of  directors  approved  a  lease  of  the  road 
to  the  West  Chicago  St.  R.  R.  Co.  for  999  years,  the  same  to  take 
effect  as  of  October  20,  1887.  The  particulars  of  this  lease  will  be 
found  more  fully  set  forth  in  Exhibit  V. 

Its  capital  stock  on  October  20,  1887,  was  $1,250,000,  which 
remains  the  same  at  the  date  of  this  report.  Its  bonded  indebted- 
ness is  $4,070,000,  ist  mortgage  44  per  cent.  4O-year  bonds,  dated 
July  i,  1892,  which  were  issued  by  resolution  of  the  board  of  di- 
rectors May  28,  1892,  to  retire  $4,040,000  certificates  of  indebted- 
ness of  various  dates  and  one  note  for  $30,000  secured  by  trust 
deed  for  certain  real  estate,  all  of  which  were  outstanding  at  the 
date  of  the  lease  except  as  elsewhere  fully  set  forth  in  this  report. 

The  lease  between  this  company  and  the  West  Chicago  St.  R. 
R.  provides  that  in  anticipation  of  the  termination  of  the  lease  at 
any  time  or  for  any  cause,  and  "for  the  purpose  of  preserving  the 
necessary  information  for  an  intelligent  accounting  *  *  *  an 
account  of  the  cost  of  all  permanent  improvements  to  the  property 
demised"  shall  be  kept. 

But  such  disbursements  of  the  character  mentioned  as  have 
been  made  since  the  date  of  the  lease  have  not  been  kept  distinct 
and  separate  from  the  disbursements  of  the  lessee  company  on  its 
account,  as  may  be  inferred  from  the  response  of  the  management 
to  a  former  request  of  your  committee  for  "the  itemized  cost  of 
all  buildings  and  equipping  of  new  lines  and  extensions,  whether 
owned  or  leased,  etc.,"  the  response  being  that  "it  is  impossible 
to  give  statement  as  asked  for  itemized,  as  the  construction  and 
equipping  of  new  lines  has  been  charged  to  the  general  construc- 
tion account,  the  total  cost  of  which  since  the  opening  of  the  road 
has  been  $9,334,395-I6-" 


124  MUNICIPAL    AFFAIRS. 

Not  only  has  it  been  necessary  to  analyze  the  general  con- 
struction account  of  the  West  Chicago  St.  R.  R.  Co.  for  a  com- 
plete list  of  the  expenditures  for  permanent  improvements  on  ac- 
count of  the  Chicago  West  Division  Ry  Co.,  but  a  comprehen- 
sive knowledge  of  the  acts  of  that  company  can  likewise  only  be  ob- 
tained by  an  examination  of  the  corporate  acts  of  the  lessee  com- 
pany, those  of  the  lessor  company  being  practically  dictated  by  the 
lessee  company.  For  that  reason  reference  is  had  to  that  part  of 
this  report  considered  under  the  heading  "West  Chicago  St.  R.  R. 
Co."  for  any  further  general  information  concerning  the  Chicago 
West  Division  Ry.  Co.  and  to  Exhibit  6  for  such  information  con- 
cerning the  expenditure  for  permanent  improvements  as  has  been 
disclosed  by  this  examination. 

Sec.  2— Financial  Condition  in  J887. 

The  mileage  of  this  road  on  October  20,  1887,  the  date  of  its 
lease  to  the  West  Chicago  St.  R.  R.  Co.,  was  98.45  miles  of  single 
track,  the  cost  of  constructing  which  was  $1,935,131.52,  or  $19,- 
655.98  per  mile. 

This  comparatively  low  cost  at  the  time  referred  to  was,  I  am 
informed,  due  principally  to  two  causes:  (i)  it  had  been  the  prac- 
tice of  this  company  for  several  years  prior  to  its  lease  to  the 
West  Chicago  St.  R.  R.  Co.  to  pay  for  extensions  and  better- 
ments out  of  its  surplus  earnings,  and  (2)  only  two  streets — Madi- 
son St.  and  Randolph  St. — representing  14  miles  out  of  the  total 
98.45  miles  of  single  track,  were  paved  and  that  mostly  with  cheap 
macadam. 

The  company  possessed  real  estate  and  buildings,  representing 
a  cost  of  $449,158.73  and  $927,984.00  respectively.  It  also  owned 
492  box  or  closed  cars  and  301  open  cars,  which  cost  $658,456,  and 
4,243  horses,  for  which  $567,599  had  been  paid,  or  an  average  of 
$134  each.  Its  engines  and  machinery  cost  $18,459,  snow-plows 
$9,170,  omnibuses  $9,172.20,  stable  furniture  $6,105.16,  office  fur- 
niture and  fixtures  $3,695.77,  harness  $10,423.70,  wagons  $2,- 
430.90,  altogether  a  total  of  $4,597,785.98,  representing  property 
regularly  employed  in  the  operation  of  its  road  or  connected  there- 
with, and  all  of  which  was  conveyed  to  the  West  Chicago  St.  R.  R. 
Co.  under  the  lease  of  October  20,  1887. 

In  addition  it  owned  certain  notes  and  bonds  representing  an 


CHICAGO   STREET    RAILWAYS.  125 

outlay  of  $14,430,  and  certain  open  accounts  representing  $5,- 
005.19. 

It  also  owned  7,300  shares  of  the  Chicago  Passenger  Ry.  Co. 
capital  stock,  for  which  it  had  paid  $850,850.00,  which  were  also 
transferred  to  the  West  Chicago  St.  R.  R.  Co.  under  the  lease,  mak- 
ing the  total  cost  value  of  the  property  transferred  to  the  latter 
company  $5,448,635.98. 

Against  this  it  had  outstanding  liabilities  at  the  time  as  follows : 
Capital  stock,  $1,250,000;  certificates  of  indebtedness,  $2,987,500; 
Suffern  note,  $30,000;  total,  $4,267,500.  It  had  other  liabilities,  but 
in  the  settlement  under  the  lease  they  were  not  assumed  by  the 
lessee  company.  For  example,  there  were  outstanding  bills  pay- 
able amounting  to  $437,940.86,  accrued  interest  on  bonds  $56,- 
291.68,  conductors1  and  drivers'  deposits  $21,125,  taxes  accrued 
$31,679,  and  certain  accounts  payable  $1,974.52,  making  total  lia- 
bilities of  every  character  $4,816,511.06,  against  total  assets  of 
every  character  $5,468,071.17,  and  showing  a  net  surplus  of  $651,- 
560.11  on  October  29,  1887. 

Sec.  3.— Transfer  of  Property  under  Lease. 

This  surplus  belonged  to  the  stockholders  of  the  Chicago  West 
Division  Ry.  Co.,  and  in  the  division  and  transfer  of  the  assets  and 
liabilities  under  the  lease  it  became  necessary  to  devise  some 
method  by  which  it  could  be  distributed  among  the  stockholders. 
In  order  to  make  the  distribution  and  secure  funds  for  the  imme- 
diate payment  of  the  $549,011.06  floating  debt  not  assumed  by  the 
lessee  company,  it  was  decided  to  issue  $1,052,500  additional  cer- 
tificates of  indebtedness,  making  the  total  amount  $4,040,000. 

The  remaining  sum  necessary  to  effect  the  liquidation  was  se- 
cured by  means  of  the  following  settlement  with  the  West  Chicago 
St.  R.  R.  Co.,  viz.: 

Payments  made  by  Chicago  West  Division  Ry.  Co.  for  ac- 
count of  the  West  Chicago  St.  R.  R.  Co. : 

Operating  expenses,  Sept.,  Oct.  and  Nov.,  1887 $408,977.17 

Operating  expenses,  Dec.,   1887 153,264.42 

Taxes   6,709.73 

Interest  coupons  5  per  cent.  Jan.,  1888  86,000.00 

Interest  coupons  6  per  cent.  Dec.,  1887  (one  half) 7,125.00 

Sundry  bills 2,280.00 

Salaries  of  officers  12  days  in  Jan.,  1888 821.88 


126  MUNICIPAL    AFFAIRS. 

37  passenger  cars  (Chicago  Passenger  Ry.) 29,030.00 

Advanced  on  note  of  West  Chicago  St.  R.  R.  Co 150,000.00 

Total $844,208.20 

Credits  allowed  West  Chicago  St.  R.  R.  Co. : 

Sept.,  Oct.  and  Nov.,  1887,  receipts $714,622.84 

One-third  taxes  for  1887 11,720.36 

Interest  5  per  cent  certificates,  July  i  to  Sept  I,  1887 28,666.67 

Interest  5  per  cent,  certificates,  Jan.,  1888 5,000.00 

City  of  Chicago  water  bill 127.65 

Cash   25,816.68 

Sum  stipulated  in  lease  to  be  paid  by  Chicago  West  Division  Ry.  Co...  37,500.00 


Total $823,454-20 

Balance  due  Chicago  West  Division  Ry.  Co $20,754.00 

This  balance  was  paid  by  the  assumption  by  the  West  Chicago  St.  R.  R.  Co. 
of  the  amount  due  conductors  and  drivers  on  account  of  their  deposits  with  the 
Chicago  West  Division  Ry.  Co.,  by  which  assumption  these  deposits  were  trans- 
ferred to  the  lessee  company  and  became  a  liability  of  that  company,  thereby  reduc- 
ing the  amount  of  the  floating  debt  to  be  paid  by  the  Chicago  West  Division  Ry. 
Co.  in  the  final  settlement 

Sec.  4. — Operations  under  Lease. 

After  the  lease  of  this  road  to  the  West  Chicago  St.  R.  R.  Co. 
1.96  miles  of  new  single-track  horse  railroad  extension  were  built 
by  the  last  named  company  for  or  on  account  of  the  lessor  com- 
pany, the  cost  of  which,  so  far  as  the  books  show  it  distinct  from 
the  general  disbursements,  on  construction  account,  is  obscure, 
but  the  cost  was  evidently  the  same  as  other  horse-railroad  being 
built  at  that  time,  viz. :  $23,825.68  per  mile. 

This  small  extension,  with  66.72  miles  of  the  original  98.45, 
was  afterward  converted  into  electric  railroad,  a  total  of  68.68  miles 
of  single  track,  at  a  cost  of  $825,163.04,  or  $11,985,48  per  mile. 

Of  the  remaining  track  450  feet  on  Lake  St.  from  Wabash 
Ave.  to  State  St.  was  transferred  to  the  Chicago  City  Ry.  Co.  to 
form  part  of  their  cable  loop ;  33,054.7  feet,  or  6.26  miles,  still  re- 
mains as  horse  railroad,  representing  an  original  cost  value  of 
$123,046.43,  and  134,018.6,  or  25.38  miles,  has  been  converted  into 
cable  road,  for  a  part  of  which  the  exact  cost  is  uncertain,  as  else- 
where explained  in  this  report. 

For  that  part  known  as  the  Blue  Island  Ave.  &  Halsted  St. 
cable  line,  extending  from  Western  Ave.  to  Halsted  St.  on  Blue 
Island  Ave.  and  from  the  junction  of  Blue  Island  Ave.  and  Halsted 
St.  on  Halsted  St.  to  O'Neill,  and  on  O'Neill  to  the  car  barns ;  from 


CHICAGO    STREET    RAILWAYS.  127 

Blue  Island  Ave.  to  Van  Buren  St.  on  Halsted,  and  on  Van  Buren 
through  the  tunnel  and  around  the  loop,  a  distance  of  11.655  miles 
single  track,  the  cost  was  $1,124,188.06,  or  $96,455.43  per  mile, 
independent  of  the  cable  power  house  at  I2th  St.  and  Blue  Island 
Ave.,  which  cost  $233,290.50  for  the  land  and  buildings  and  $173,- 
240.47  for  the  machinery,  and  of  the  Van  Buren  St.  power  house, 
which  cost  $142,326.44  for  the  buildings  and  land  and  $116,627.53 
for  machinery. 

The  exact  cost  of  this  entire  system,  including  real  estate, 
power  houses  and  machinery,  is  established,  and  represents  a  total 
investment  as  follows : 

11.655  miles  single  track  cable  road $1,124,188.06 

Blue  Island  Ave.  power  house j  Real  estate 233,290.50 

(  Machinery 173,240.47 

Van  Buren  St.  power  house  C  Real  estate 142,326.44 

(  Machinery   116,627.53 

Total  cost $1,789,673.00 

Of  the  original  $1,935,131.52  first  cost  of  the  98.45  miles  of 
single-track  road  existing  at  the  time  of  the  lease,  plus  $46,698.51 
at  the  same  rate  per  mile  for  the  1.96  miles  built  soon  after,  there 
remains  of  the  total  horse  railroad  mileage  6.26  miles  single  track 
and  $123,046.43  of  the  original  cost,  showing  a  depreciation  rn 
value,  because  of  the  substitution  of  a  road  of  a  different  character, 
the  cost  of  which  substitution  is  necessarily  taken  as  the  cost  value 
of  the  road  after  the  change,  the  sum  of  $1,858,783.60  chargeable 
to  profit  and  loss. 

Sec.  5. — Assets  and  Liabilities  Compared. 

Of  the  original  road  and  extensions  made  since  the  lease  there 
existed  on  December  31,  1897,  the  following: 

6.26    miles  single  track  horse  road  $123,046.43 

68.68    miles  single  track  electric  road  825,163.04 

11.655  miles  single  track  cable  road  (actual) 1,124,188.06 

0.321  miles  single  track  cable  road  (actual) 44,690.05 

13.404  miles  single  track  cable  road  (estimated)   1,292,888.56 

100.32    miles  single  track $3,409,976.14 

Add  Real  estate,  on  Oct.  20,  1887 449,158.73 

Buildings,  on  Oct.  20,  1887 927,984.00 

Western  Ave.  power  house 520,455.65 

Halsted  St.  car  house  alterations 11,803.70 

New  building  Clybourn  Place 52,839.50 


Total $5,372,217.72 


128  MUNICIPAL    AFFAIRS. 

Against  this  are  oustanding  liabilities  as  follows: 

Capital  stock $1,250,000.00 

First  mortgage  bonds 4,070,000.00 

Due  West  Chicago  St.  R.  R.  Co 4,869,998.38 

Total $10,189,998.38 

showing  a  deficit  of  $4,817,780.66. 

This  deficit,  however,  does  not  take  into  consideration  the  fact 
that  in  converting  the  68.68  miles  single-track  horse  road  into  trol- 
ley road  there  may  have  been  more  or  less  salvage  in  the  old  road 
which  became  incorporated  into  the  new  trolley  road,  the  value  of 
which  is  lost  in  assuming  that  the  sum  actually  expended  in  mak- 
ing the  conversion  likewise  represents  the  full  cost  value  of  the 
road  as  it  exists  at  the  present  day.  As  a  matter  of  fact,  the  en- 
tire street  pavement  of  the  old  horse  road  referred  to  was  relaid 
or  continued  in  use  as  before  the  change,  and  therefore  its  original 
cost  is  properly  a  part  of  the  total  cost  value  of  the  new  electric 
road. 

The  exact  amount  of  pavement  thus  relaid  and  its  original  cost 
are  as  follows: 

Wood,     16.603  miles  by  8  feet,  cost $77,923.00 

Cobble,   44.107  miles  by  8  feet,  cost 258,761.25 

Granite,    7.97    miles  by  8  feet,  cost 74,811.68 

68.68    miles     Total,     cost $411,495.93 

Deducting  this  sum  from  the  deficit  first  obtained  leaves  as  a 
final  deficit  $4,406,284.73,  and  by  adding  it  to  the  sum  actually  ex- 
pended in  making  the  change  from  horse  to  trolley  road,  to  wit. : 
$825,163.04,  makes  the  total  value  of  the  68.68  miles  single-track 
trolley  road  $1,236,658.97,  or  an  average  of  $18,006.10  per  mile. 


EXHIBIT  VI.— WEST  CHICAGO  STREET  RAILROAD  CO. 

Sec.  J.— Lease  of  West  Side  Lines. 

This  company  was  incorporated  July  19,  1887.  Its  original 
capital  stock  was  $10,000,000,  divided  into  100,000  shares  of  $100 
each.  The  original  subscribers  and  directors  were: 

David  Crawford,  99,497  shares;  Richard  C.  Crawford,  500 
shares ;  J.  Chas.  Moore,  i  share ;  J.  A.  Reeve,  I  share ;  Burdetta  C. 
Barnes,  i  share.  At  the  first  meeting  of  the  board  of  directors 


CHICAGO    STREET    RAILWAYS.  129 

Reeve,  Barnes  and  David  Crawford  resigned  and  Andrew  Craw- 
ford, F.  S.  Winston  and  C.  T.  Yerkes  were  elected  directors  in 
their  places. 

On  November  n,  1887,  P.  A.  B.  Widener,  W.  L.  Elkins  and 
Wm.  H.  Kemble  apparently  owned  6,251  shares  of  stock  of  the 
Chicago  West  Division  Railway  Company,  or  one  share  more  than 
one-half  the  entire  capital  stock  of  the  last  named  company.  At 
the  meeting  of  the  board  of  directors  of  the  West  Chicago  St.  R. 
R.  Co.  on  November  n,  1887,  it  was  proposed  to  purchase  this 
stock  from  Widener,  Elkins  and  Kemble,  and  thereby  secure  con- 
trol of  the  road.  At  the  same  time  it  was  proposed  to  lease  the 
Chicago  West  Division  Ry.  in  the  following  terms: 

Lessee  to  pay  rental  equal  to  35  per  cent,  per  annum  on  the 
capital  stock  of  the  lessor  company,  which  was  at  that  time  and 
still  remains  $1,250,000;  $109,375  Per  quarter;  first  payment  Jan. 
20,  1888.  Lessee  to  receive  the  entire  gross  earnings  from  August 
31,  1887,  meaning  the  gross  passenger  receipts,  and  $37,500  in 
cash.  Lessee  to  assume  the  outstanding  bonded  debt  of  the  lessor 
company,  which  at  that  time  was  as  follows: 

Certificates  of  indebtedness  dated  March  I,  1882,  6  per  cent.,  20  years. .  $125,000.00 
Certificates  of  indebtedness  dated  June  I,  1882,  6  per  cent.,  20  years. .  475,000.00 
Certificates  of  indebtedness  dated  July  I,  1887,  5  per  cent.,  20  years. .  3,440,000.00 

Total $4,040,000.00 

Also  note  for  $30,000,  secured  by  trust  deed  of  Lot  I,  Block  4,  Suffern's 

Sub.  S.  W.  l/t  Sec.  6-39-14,  5  per  cent.,  dated  April  26,  1886 30,000.00 

Total $4,070,000.00 

The  consideration  for  the  lease  and  the  6,251  shares  of  stock 
was  4,100  bonds  of  the  West  Chicago  St.  R.  R.  Co.,  $1,000  each,  5 
per  cent,  40  years  (to  be  secured  by  the  6,251  shares  of  West 
Division  stock),  and  $6,000,000  in  cash,  or  capital  stock,  at  the  op- 
tion of  the  lessee  company. 

It  was  stipulated  in  the  lease  that  the  lease  itself  was  to  bear 
date  and  take  effect  as  of  October  20,  1887,  and  continue  for  999 
years ;  that  if  the  lessee  took  up  or  redeemed  all  or  any  part  of  the 
$4,070,000  outstanding  debt  the  lessor  company  would  issue  new 
bonds  to  the  lessee  to  take  their  place.  Under  this  stipulation  the 
present  outstanding  $4,070,000  ist  mortgage  4k  Per  cent,  bonds  of 
the  Chicago  West  Division  Ry.  Co.  were  issued  May  28,  1892. 

It  was  further  stipulated  that  the  lease  was  not  transferable. 


130  MUNICIPAL    AFFAIRS. 

This  did  not,  however,  apply  to  the  Chicago  Passenger  Railway, 
which  at  that  time  was  being  operated  by  the  Chicago  West  Di- 
vision Railway  Company,  but  it  was  expressly  stipulated  that  the 
inventory  of  the  property  to  be  turned  over  by  the  last  named 
company  should  include  the  7,300  shares  of  the  Chicago  Passenger 
Ry.  Co.,  then  owned  by  the  Chicago  West  Division  Ry.  Co.,  and 
by  means  of  which  control  of  the  property  of  that  company  was 
also  secured  under  the  lease  of  October  20,  1887. 

The  lease  also  stipulated  that  the  lessee  company  should  build 
not  less  than  17  miles  of  cable  road  and  "for  the  purpose  of  pre- 
serving the  necessary  information  for  an  intelligent  accounting  be- 
tween the  parties  hereto"  an  inventory  of  the  property  transferable 
was  to  be  made  and  preserved,  "also  an  account  of  the  cost  of  all 
permanent  improvements  to  the  property  demised  that  is  made  by 
said  lessee  other  than  ordinary  repairs,  herein  provided  for,  to  be 
made  by  said  lessee,  etc." 

See*  2.— Construction  of  Cable  Road. 

I  have  succeeded  in  obtaining  a  partial  list  of  the  property 
transferred,  but  for  the  17.47  miles  of  single-track  cable  road  built 
soon  after  the  lease  was  made  I  have  been  able  to  find  no  detailed 
account  such  as  would  seem  to  be  clearly  called  for  by  the  terms  of 
the  lease.  The  records  simply  show  that  on  November  17,  1887, 
the  board  of  directors  authorized  the  president  to  enter  into  a 
contract  with  the  United  States  Construction  Company  to  lay  a 
cable  road  on  the  following  streets : 

Madison  St.,  double  track,  40th  St.  to  Desplaines  or  Jefferson  Sts. ;  Desplaines 
or  Jefferson,  double  track,  Madison  to  Washington  St. ;  Washington  St.,  Desplaines 
or  Jefferson  through  Washington  St.  tunnel  to  5th  Ave. ;  double  track  and  single 
track  from  5th  Ave.  to  State  St.;  State  St.,  Washington  to  Madison  St.,  single 
track ;  Madison  St.,  State  to  5th  Ave.,  single  track ;  5th  Ave.,  Madison  St.  to  Wash- 
ington St.,  single  track;  Armitage  Ave.,  Milwaukee  Ave.  to  barn,  double  track; 
Milwaukee  Ave.,  Armitage  Ave.  to  Desplaines  or  Jefferson,  double  track ;  Desplaines 
or  Jefferson,  Milwaukee  Ave.  to  Washington  St.,  double  track. 

The  contract  subsequently  entered  into  specified  that  the  Construction  Company 
shall  furnish  all  necessary  passenger  and  grip  cars;  repair  and  put  in  good  condi- 
tion the  Washington  St.  tunnel  and  light  the  same;  make  all  necessary  vaults, 
changes  of  sewer  and  gas  pipes,  water  pipes,  conduits,  pavements  and  any  other 
improvements;  also  engines,  engine  houses,  machinery,  cables  and  all  necessary 
changes  of  the  cars  now  used  on  the  horse  railroads  on  said  lines  so  to  be  cabled 
and  any  additional  cars,  to  thoroughly  equip  the  said  cable  tracks  sufficient  to  do 
the  said  railroad  company's  business  thereon.  *  *  *  In  short,  the  said  Con- 
•truction  Company  shall  furnish  and  do  everything  necessary  to  complete  and 


CHICAGO    STREET    RAILWAYS.  131 

equip  the  said  cable  system  except  furnishing  the  real   estate  on  which  to  erect 
necessary  buildings — that  to  be  provided  by  the  said  railroad  company. 

All  patent  rights  of  the  Construction  Company  are  conveyed  to  the  railroad 
company.  Work  to  commence  within  thirty  days  from  receipt  of  authority  from 
the  City  of  Chicago.  This  authority  was  contained  in  the  ordinance  of  March  30, 


The  consideration  to  be  paid  was  $4,000,000  in  cash  or  stock 
at  the  option  of  the  West  Chicago  St.  R.  R.  Co.  The  company 
elected  to  pay  in  stock  and  "to  deliver  the  same  in  installments 
from  time  to  time  as  the  work  progressed  upon  estimates  approved 
by  the  president  of  this  company."  The  contract  required  that  the 
"$4,000,000  be  paid  in  cash  at  once  to  the  Construction  Company. 
They  to  put  $4,000,000  in  capital  stock  of  the  West  Chicago  St. 
R.  R.  in  trust  as  security  for  the  completion  of  the  contract  and  re- 
ceive instalments  of  it  back  on  estimates  of  the  president  of  the  last 
named  company  of  work  done." 

Pursuant  to  this  stipulation,  Geo.  E.  Newlin  was  on  Novem- 
ber 21,  1887,  appointed  trustee  of  the  stock  mentioned.  On  Octo- 
ber 22,  1890,  all  of  this  stock  had  been  delivered  to  the  Construc- 
tion Company  by  the  trustee  except  500  shares,  and  on  that  date 
these  were  ordered  delivered  by  the  board  of  directors  and  the 
Construction  Company  released  from  its  contract,  the  same  having 
been  completed. 

Sec.  3.— Capital  Stock  Issued. 

The  contract  for  the  lease  and  the  purchase  of  the  6,251 
shares  of  Chicago  West  Division  Ry.  Company  stock  from  Wid- 
ener,  Elkins  and  Kemble  for  $4,100,000  in  ist  mortgage  5  per 
cent,  4o-year  bonds  of  the  new  company  and  $6,000,000  in  cash  or 
capital  stock  was  passed  and  approved  by  the  board  of  directors 
and  stockholders  on  November  n,  1887,  the  stockholders  voting 
as  follows : 

C.  T.  Yerkes,  99,497  shares ;  R.  C.  Crawford,  500  shares ;  An- 
drew Crawford,  i  share;  F.  S.  Winston,  i  share;  J.  C.  Moore,  i 
share. 

Although  the  lease  between  the  Chicago  West  Division  Ry. 
Co.  and  the  West  Chicago  St.  R.  R.  Co.  was  dated  October  20, 
1887,  as  a  matter  of  fact  the  new  management  did  not  assume 
actual  charge  of  the  property  until  January  12,  1888.  Their  books 
of  account,  however,  were  opened  as  of  December  i,  1887,  anc*  the 


132  MUNICIPAL    AFFAIRS. 

receipts  and  disbursements  from  Aug.  31,  1887,  subsequently 
posted. 

On  the  last  day  of  December,  1887,  the  first  entries  concern- 
ing the  purchase  of  the  6,251  shares  of  stock,  the  lease  of  the  Chi- 
cago West  Division  Ry.  and  the  contract  with  the  U.  S.  Con- 
struction Company  appear,  and  these  indicate  that  Widener,  Elkins 
and  Kemble  were  paid  $5,100,000  for  the  6,251  shares  of  stock  and 
$5,000,000  for  securing  the  lease,  and  the  U.  S.  Construction  Com- 
pany $4,000,000  to  construct  the  17.47  miles  of  cable  system  al- 
ready referred  to.  At  the  same  time  Widener,  Elkins  and  Kemble 
are  charged  with  $6,000,000  and  the  U.  S.  Construction  Company 
$4,000,000,  their  respective  subscriptions  to  the  capital  stock  of  the 
West  Chicago  St.  R.  R.  Co.,  and  "Capital  Stock"  account  is  cred- 
ited with  $10,000,000  to  balance  the  transaction  on  the  books. 
Widener,  Elkins  and  Kemble  are  then  credited  with  having  paid 
their  subscription  of  $6,000,000  in  cash  and  the  company  takes 
credit  with  .having  paid  them  also  in  cash  $1,000,000  on  account  of 
the  6,251  shares  of  Chicago  West  Division  stock  and  $5,000,000 
on  account  of  the  lease  of  the  Chicago  West  Division  Ry. 

In  the  same  manner  the  U.  S.  Construction  Company  is  cred- 
ited with  paying  its  stock  subscription  in  cash,  and  as  an  offset  is 
charged  with  receiving  the  same  amount  in  cash  on  account  of  the 
contract  to  construct  the  cable  system  already  referred  to. 

The  effect  and  obvious  intent  of  these  entries  is  to  make  it  ap- 
pear from  the  records  that  the  capital  stock  was  sold  for  cash  and 
incidentally  that  the  transaction  in  stock  was  entirely  distinct  and 
independent  of  the  contract  for  the  construction  of  the  cable  sys- 
tem, the  purchase  of  the  6,251  shares  of  Chicago  West  Division  Ry. 
Co.  stock  and  the  lease  of  the  last  named  road;  the  fact  that  the 
contracting  parties  in  each  instance  were  identical  was  a  mere  coin- 
cidence without  special  significance. 

The  improbability  that  any  of  the  capital  stock  was  disposed  of 
for  cash  may  be  inferred  from  several  collateral  facts. 

(i)  It  was  expressly  stipulated  in  the  lease  and  in  the  cable 
construction  contract  that  payment  might  be  made  in  cash  or  capital 
stock  at  the  option  of  the  Railroad  Company,  which  reservation, 
though  not  conclusive  in  itself,  is  presumptive  that  payment  was 


CHICAGO    STREET    RAILWAYS.  133 

made  in  capital  stock,  being  the  most  convenient  and  economical 
form  of  payment. 

(2)  The  parties  to  whom  the  West  Chicago  St.  R.  R.  Co.  was 
indebted  being  likewise  indebted  to  the  West  Chicago  St.  R.  R. 
Co.  in  precisely  the  same  sum,  one  obligation  being  offset  by  the 
other,  the  most  natural  supposition  is  that  the  simplest  and  most 
direct  method  of  settlement  was  adopted,  which  would  have  been 
to  exchange  the  stock  for  receipted  vouchers  representing  pay- 
ments on  account  of  the  construction  contract,  lease,  etc. 

(3)  Four  millions  of  capital  stock  was  placed  in  the  hands  of 
Geo.  E.  Newlin,  as  trustee,  to  be  paid  over  to  the  U.  S.  Construc- 
tion Co.  in  installments  as  work  progressed  on  the  cable  system. 

The  total  cost  of  the  cable  system,  according  to  the  contract, 
was  not  to  exceed  four  million  dollars,  and  so  far  as  the  "Con- 
struction" account  shows  this  entire  sum  was  paid  to  the  U.  S. 
Construction  Company  in  cash  in  advance  of  any  work  done  by  that 
company;  thereupon  the  latter  company  returned  the  money  to 
the  West  Chicago  St.  R.  R.  Co.,  in  payment  of  its  subscription, 
receiving  in  return  the  $4,000,000  capital  stock  referred  to  above, 
which  it  deposited  in  trust  as  a  guarantee  that  it  would  complete 
the  construction  of  the  cable  system. 

Aside  from  the  unusual  character  of  the  guarantee — the 
amount  on  deposit  at  all  times  being  more  than  sufficient  to  cover 
any  loss  that  the  West  Chicago  St.  R.  R.  Co.  might  sustain  by  be- 
ing compelled  to  relet  the  contract — it  will  be  noticed  that  the 
stock  itself  is  supposed  to  have  been  paid  for  with  the  $4,000,000 
received  from  the  West  Chicago  St.  R.  R.  Co. 

A  careful  examination  of  the  books  of  the  company  shows 
that  at  no  time  prior  to  or  approximating  the  date  of  the  cable 
contract,  November  17,  1887,  was  the  West  Chicago  St.  R.  R.  Co. 
in  possession  of  so  large  a  sum  as  $4,000,000  in  cash,  and  there- 
fore could  not  have  made  any  such  payment  to  the  U.  S.  Construc- 
tion Co. 

It  had  only  its  $10,000,000  in  capital  stock  with  which  to  pay 
for  anything.  Its  first  issue  of  bonds  ($4,100,000)  had  not  yet 
been  printed,  and  in  fact  were  not  authorized  till  April  9,  1888,  and 
it  had  not  yet  come  into  actual  possession  of  the  property  or  funds 
of  the  Chicago  West  Division  Ry.  Co.,  and  therefore  could  aot 


134  MUNICIPAL    AFFAIRS. 

make  use  of  the  receipts  of  that  company  from  August  31,  1887, 
which  under  the  lease  were  to  be  turned  over.1 

It  is  very  plain  that  no  such  sum  in  cash  was  paid  to  the  U. 
S.  Construction  Co.  by  the  West  Chicago  St.  R.  R.  Co.  as  stated  in 
its  books,  and  it  is  equally  clear  that  the  $4,000,000  in  stock  de- 
posited in  trust  by  the  U.  S.  Construction  Co.  was  not  paid  for  at 
the  time  of  its  deposit,  and  therefore  the  instalments  of  stock  sub- 
sequently paid  over  to  the  U.  S.  Construction  Co.  by  the  trustee 
from  time  to  time  were  not  a  release  of  any  part  of  the  supposed 
guarantee  deposit  but  actual  payments  in  stock  for  work  done  as 
it  progressed.2 

The  only  entry  in  the  books  to  show  the  payment  of  $4,000,000 
for  the  cable  system  is  that  of  December  31,  1887,  as  already 
stated,  and  as  that  could  not  have  been  paid  in  cash  it  is  fair  to 
presume  that  it  was  paid  in  stock,  the  only  available  means  the 
company  possessed  at  that  time  of  paying  any  such  sum. 

Immediately  the  stock  was  issued  and  became  a  liability  of  the 
company,  it  was  necessary  to  offset  it  with  an  entry  on  the  other 
side  of  the  ledger,  and  this  was  done  by  opening  "Construction" 
account  and  debiting  it  at  once  with  $4,000,000,  although  there  was 
nothing  in  the  way  of  tangible  property  to  show  for  it. 
Sec.  4. — Payment  for  Negotiating  Lease. 

The  supposed  receipt  of  $6,000,000  in  cash  from  Widener, 
Elkins  and  Kemble,  in  full  payment  of  their  subscription  to  the 
capital  stock,  and  the  immediate  repayment  of  the  money  to  them 
— $5,000,000  on  account  of  the  lease  which  they  had  negotiated 
and  which  had  been  signed  and  approved  by  both  parties,  by  the 
lessor  on  October  29,  1887,  and  by  the  lessee  on  November  n, 
1887,  and  $1,000,000  in  advance  for  the  6,251  shares  of  Chicago 
West  Division  Ry.  Co.  stock  which  they  were  to  deliver — are  en- 
tries of  a  similar  character,  although  the  money  or  a  cheque  for 

1  Even  if  it  had  been  in  possession,  the  gross  receipts  from  August  31,  1887,  to 
December  31,  1887,  when  the  transfer  was  made,  without  any  deduction  for  operat- 
ing expenses  in  the  meantime,  were  less  than  one-quarter  the  sum  supposed  to  have 
been  paid  in  cash  to  the  United  States  Construction  Company  prior  to  December 
31,  1887. 

1  In  this  connection  it  may  be  well  to  call  attention  to  the  absence  of  any  provi- 
sion in  the  contract  for  the  forfeiture  of  the  whole  or  any  part  of  the  guarantee 
deposit  for  non-fulfillment  of  the  contract,  which  in  itself  rendered  the  supposed 
guarantee  of  no  value,  and  under  the  circumstances  was  useless,  since  the  deposit 
would  revert  to  its  proper  owner  in  that  contingency. 


CHICAGO    STRE  ET    RAILWAYS.  135 

$6,000,000  might  have  actually  been  passed  back  and  forth,  but  the 
improbability  and  inutility  of  such  a  movement  is  plain,  since  it 
was  needless  to  effect  a  set-off  in  the  accounts. 

It  is  not  part  of  my  functions  to  enter  into  the  question  of  the 
reasonableness  of  the  charge  of  $5,000,000  for  simply  negotiating 
the  lease  between  the  two  railroad  companies,  one  of  which  al- 
ready controlled  the  acts  of  the  other  by  reason  of  its  ownership  of 
a  majority  of  the  capital  stock  or  for  which  ownership  provision 
had  already  been  made,  but  simply  to  state  the  facts  as  I  find  them. 
At  the  same  time  it  would  be  impossible  to  pass  over  such  a  pay- 
ment for  services  without  comment,  especially  as  the  necessity  for 
such  service  on  the  part  of  outside  parties  is  not  in  the  remotest 
degree  apparent. 

So  far  as  the  entries  in  the  books  are  concerned,  no  attempt  is 
made  to  conceal  the  payment  of  $5,000,000  to  Widener,  Elkins  and 
Kemble  for  negotiating  the  lease,  although  a  consolidation  of  ac- 
counts two  years  after  the  payment  may  have  had  that  for  its  ob- 
ject. Up  to  December  31,  1890,  an  account  was  carried  on  the 
ledger  showing  a  debit  balance  of  $5,000,000  under  the  title 
"Leasehold."  On  that  date  it  was  closed  out  and  the  balance 
transferred  to  a  new  account  entitled  "Cable  Road,  Power  Station, 
Lease  and  Equipment,"  and  to  the  same  account  was  transferred 
$4,000,000  from  the  general  "Construction"  account,  making  a 
total  to  the  debit  of  that  account  of  $9,000,000,  which  has  been 
carried  through  the  trial  balances  of  the  company  each  year  since. 

So  far  as  this  entry  affected  the  construction  account,  it  ex- 
plicitly states  that  it  is  made  "so  that  'Construction'  account  will 
show  the  expenditures  for  new  work  other  than  that  done  by  the 
U.  S.  Construction  Co.,"  which  is  correct. 

The  payment  of  $1,000,000  to  Widener,  Elkins  and  Kemble, 
however,  seems  to  have  been  premature  and  forced,  as  the  con- 
tract for  the  delivery  of  the  6,251  shares  of  Chicago  West  Division 
Ry.  Co.  shares  allowed  them  two  years  from  November  n,  1887,  in 
which  to  make  the  delivery;  and  the  $4,100,000  of  ist  mortgage 
bonds,  the  principal  part  of  the  consideration,  were  not  author- 
ized until  April  9,  1888,  and  not  delivered  to  them  until  May  15, 
1888. 

A  careful  scrutiny  of  all  the  entries  in  the  books,  and  con- 


136  MUNICIPAL    AFFAIRS. 

sideration  of  all  the  circumstances  in  connection  with  the  issue  of 
the  capital  stock  and  bonds,  leads  me  to  believe  that  the  sole  pur- 
pose of  the  promoters  was  to  gain  possession  of  the  entire  capital 
stock  of  the  company  in  advance  of  the  delivery  of  the  6,251  shares 
of  West  Division  stock  and  the  commencement  of  the  work  of  in- 
stalling the  proposed  cable  system.  The  redepositing  of  $4,000,- 
ooo  of  the  stock  under  the  pretext  of  guaranteeing  the  completion 
of  the  cable  contract  was,  in  effect,  the  return  of  that  much  stock 
to  cover  the  cost  of  construction,  but  the  $6,000,000  retained  by  the 
promoters  evidently  represented  their  profits. 

Sec.  5.— Mr.  Yerkes*  Interpretation  of  the  Lease. 

The  precise  distinction  on  the  books  in  recording  the  issue  of 
the  stock  to  Widener,  Elkins  and  Kemble  and  the  U.  S.  Construc- 
tion Co.,  and  the  exact  division  of  the  stock  and  bonds  between 
them  and  for  the  purposes  shown  by  the  books  of  account,  have,  in 
my  judgment,  no  real  significance,  as  all  of  these  parties  were,  to- 
gether with  the  management  of  the  West  Chicago  St.  R.  R.  Co., 
practically  one  and  the  same  institution,  with  interests  in  common 
and  controlled  by  the  same  motive  from  long  association. 

Furthermore,  Mr.  Yerkes'  own  explanation  of  the  circum- 
stances accords  with  this  supposition: 

"With  the  object  in  view  of  accomplishing  a  certain  end,  two  contracts  were 
made.  That  end  was  that  Elkins,  Widener  and  Kemble  and  the  United  States  Con- 
struction Company  were  to  furnish  to  the  West  Chicago  Street  Railroad  Company 
6,251  shares  of  West  Division  stock  and  a  cable  plant. 

"It  was  agreed  between  the  parties  in  interest  that  for  the  cable  plant  the  rail- 
road company  was  to  pay  $10,000,000  in  cash  or  stock,  and  for  the  6,251  shares  of 
West  Division  stock  $4,100,000  of  first  mortgage  bonds. 

"At  the  time  the  contracts  were  made  the  railroad  company  insisted  that  $10,- 
000,000  of  stock  should  be  delivered  only  as  the  work  progressed  and  on  engineers' 
certificates.  This  did  not  suit  the  plans  of  Elkins,  Widener  and  Kemble,  who  in- 
sisted that  they  should  receive  at  least  one-half  of  the  stock  before  the  work  com- 
menced, so  that  they  could  arrange  with  some  of  their  associates  for  money. 

"Finally  the  railroad  company  agreed  to  give  them  $6,000,000  of  stock  at  once 
and  $4,000,000  of  stock  as  the  work  progressed. 

"The  contracts  were  made  in  accordance  with  this  arrangement.  The  contract 
was  made  with  the  construction  company  for  $4,000,000  of  stock,  and  with  Elkins, 
Widener  and  Kemble  for  $6,000,000  of  stock  and  $4,100,000  of  bonds,  the  object 
being  to  place  the  matter  in  such  a  position  that  the  stockholders  of  the  West 
Chicago  Company  could  not  complain  that  the  stock  was  delivered  before  value  was 
received  by  the  railroad  company. 

"As  the  construction  company  and  Elkins,  Widener  and  Kemble  were  the  same, 
they  were  willing  to  take  it  in  this  way. 


CHICAGO   STREET    RAILWAYS.  137 

"Of  course  there  had  to  be  some  consideration  given  for  the  delivery  of  this 
$6,000,000  of  stock.  That  consideration  was  named  in  the  contract  as  obtaining  the 
lease. 

"In  making  the  entries  for  these  different  items,  the  terms  of  the  contracts  were 
held  to.  Really  the  agreement  was  that  the  railroad  should  pay  $10,000,000  of  stock 
for  the  work  done. 

**I  would  say,  further,  that  the  $6,000,000  of  stock  which  Elkins  and  Widener 
received  went  to  the  United  States  Construction  Company,  the  United  States  Con- 
struction Company  using  it  in  payment  of  the  work." 

In  the  absence  of  the  books  of  the  U.  S.  Construction  Co.  it  is 
difficult  to  state  what  the  actual  cost  of  the  cable  plant  was.  Ac- 
cording to  Mr.  Yerkes,  the  cost  was  $7,800,000,  leaving  $2,200,000 
to  cover  any  discount  at  which  the  stock  may  have  been  disposed 
of  by  the  Construction  Co.  and  the  profit  to  the  promoters. 

In  the  case  of  the  North  Chicago  St.  R.  R.  cable  plant,  the 
actual  cost  is  stated  to  have  been  $4,200,000.  In  that  instance  the 
plant  consisted  of  n-J  miles  of  single-track  road  and  necessary 
power  houses,  etc.,  while  in  the  case  of  the  West  Chicago  St.  R.  R. 
plant  17.47  miles  single  track  cable  road,  etc.,  were  built,  which  at 
$7,800,000  would  seem  to  indicate  that  the  difference  in  cost  is  ap- 
proximately in  proportion  to  the  difference  in  mileage.  But  this 
is  not  conclusive,  for  obvious  reasons. 

I  have  made  every  endeavor  to  obtain  access  to  the  books  of 
the  U.  S.  Construction  Co.,  in  order  to  ascertain  the  exact  cost  of 
both  plants,  and  have  suggested  that  it  was  in  the  interests  of  the 
companies  themselves  to  show  beyond  question  that  the  West  Side 
system  cost  $7,800,000  and  the  North  Side  $4,200,000,  as  claimed, 
but  without  success.1 

1  From  Mr.  J.  C.  Moore,  the  present  secretary  and  treasurer  of  the  North  Chi- 
cago Street  Railroad  Company,  who  kept  the  Chicago  books  of  the  United  States 
Construction  Company  during  the  period  of  construction,  I  learned  that  most  of  the 
purchases  of  iron  and  other  heavy  material  and  the  making  and  payment  of  sub- 
contracts were  made  directly  from  the  Philadelphia  office  of  the  company,  and  there- 
fore do  not  appear  on  the  Chicago  books ;  and  that  the  latter  books  contain  the  dis- 
bursements for  labor  only,  and  therefore  would  afford  no  satisfactory  information 
as  to  the  total  cost.  These  books  were  forwarded  to  Philadelphia  when  the  work 
was  completed.  I  have  asked  for  these  books,  nevertheless,  or  for  the  privilege  of 
examining  the  general  books  of  the  company  in  Philadelphia. 

Mr.  Yerkes  consented  to  my  request,  and  he  not  only  consented  but  actually  pro- 
duced every  book  and  paper  accessible  which  I  have  called  for,  although  indisposed 
to  do  so  in  the  beginning  of  my  investigation,  and,  I  understand,  wrote  to  Mr. 
Widener  at  Philadelphia,  requesting  for  me  the  privilege  of  examining  the  construc- 
tion company's  books.  A  few  days  later  he  informed  me  that  he  had  received  word 
from  Mr.  Widener  that  he  (Widener)  did  not  know  where  the  books  were. 

I  am  indisposed  to  believe  that  Mr.  Yerkes  has  otherwise  than  stated  the  truth 
in  this  effort  to  obtain  access  to  the  books  mentioned,  as  it  is  clearly  in  his  interest 
to  produce  the  records  in  support  of  his  statements,  since  the  result  of  my  examina- 


138  MUNICIPAL    AFFAIRS. 

Sec.  6—  Market  Value  of  West  Division  Railway  Stock, 

In  the  course  of  my  investigation  I  obtained  from  Mr.  Webb, 
the  secretary,  an  official  statement  of  the  net  profits  of  the  Chicago 
West  Division  Ry.  Co.  for  the  ten  months  preceding  its  lease  to  the 
West  Chicago  St.  R.  R.  Co.,  which  seems  to  show  the  basis  upon 
which  the  guaranteed  rental  of  35  per  cent,  per  annum  was  after- 
wards made. 

From  this  statement  it  would  appear  that  the  net  profits  for  the 
period  mentioned  were  $364,161.85,  or  at  the  rate  of  35  per  cent, 
per  annum  on  the  capital  stock  of  $1,250,000.  On  a  5  per  cent, 
basis  this  would  give  the  stock  a  market  value  of  $700  per  share, 
or  an  aggregate  of  $8,750,000,  and  6,251  shares  would  represent  a 
market  value  of  $4,375,700. 

According  to  the  contract  with  Widener,  Elkins  and  Kemble, 
the  West  Chicago  St.  R.  R.  Co.  paid  $5,100,000  for  6,251  shares,  or 
at  the  rate  of  $815.86  per  share.  This  accords  with  the  sworn 
statement  of  the  company  filed  with  the  New  York  Stock  Exchange 
at  the  time  of  listing  the  securities,  but  is  in  conflict  with  Mr. 
Yerkes'  own  statement,  quoted  above,  that  the  $4,100,000  first 
mortgage  bonds  were  issued  in  payment  of  the  6,251  shares  of  West 
Division  stock. 

Considering  the  importance  of  this  information  in  determining 
the  value  received  by  the  company  in  return  for  its  securities,  it  is 
necessary  to  briefly  state  a  few  reasons  for  believing  that  the  aver- 
age price  paid  the  actual  owners  of  these  shares  was  between  $655 
and  $656  per  share. 

It  will  be  remembered  that  the  West  Chicago  St.  R.  R.  Co.  was 
not  incorporated  till  July  19,  1887;  nevertheless  the  1896  issue  of 
the  Economist  Street  Railway  Supplement  states,  as  coming  from  re- 

tion  thus  far  shows  an  apparently  excessive  profit  to  the  promoters  of  the  North  and 
West  Side  roads.  But  as  it  is  a  matter  of  public  notoriety  that  for  several  years  he 
has  not  been  on  the  most  friendly  terms  with  his  former  colleagues,  it  is  therefore 
not  unreasonable  to  presume  that  his  influence  with  them  is  less  than  formerly.  They 
certainly  cannot  have  the  same  motive  for  submitting  their  private  acts  to  public 
scrutiny. 

As  regards  Mr.  Yerkes  himself,  this  report  will  show,  without  the  necessity  of 
making  the  statement,  that  I  have  had  access  generally  to  all  the  facts  concerning 
his  companies,  and  that  my  examination  covers  practically  their  whole  history  from 
their  inception  down  to  January  i,  1898.  In  no  case  have  I  been  satisfied  to  accept 
information  from  him  or  any  of  his  subordinates  except  where  I  have  subsequently 
had  the  opportunity  of  verifying  it  by  reference  to  the  records  themselves.  In  all 
cases  where  I  have  received  information  without  such  verification,  the  circumstances 
are  explicitly  stated  herein,  as  well  as  the  reasons  for  introducing  it 


CHICAGO   STREET    RAILWAYS.  139 

liable  authority,  that  one  month  earlier,  or  "in  June,  1887,  negotia- 
tions were  closed  between  Chas.  T.  Yerkes  and  his  associates  and 
the  officers  of  the  Chicago  West  Division  Ry.  Co.,  by  which  Mr. 
Yerkes  acquired  6,251  shares,  or  one  more  than  a  majority  of  the 
capital  stock  outstanding.  The  price  paid  was  $650  a  share,  ar- 
rangements being  made  for  the  payment  of  that  amount  in  several 
installments." 

The  first  proposition  presented  to  the  West  Chicago  St.  R.  R. 
Co.  for  the  purchase  of  these  shares  was  on  November  n,  1887, 
and  according  to  the  terms  agreed  upon,  Widener,  Elkins  and 
Kemble  were  given  two  years  in  which  to  make  delivery,  which 
would  seem  to  indicate  that  the  desired  number  of  shares  was  yet 
to  be  acquired  by  them. 

As  the  action  of  the  market  price  for  some  time  before  and 
after  this  date  has  a  direct  bearing  upon  the  price  paid,  it  may  be 
stated  that  on  June  12,  1886,  the  quotations  on  the  Chicago  Stock 
Exchange  were  $400  per  share  bid  and  $425  asked.  These  were 
the  ruling  quotations  for  the  balance  of  the  year  1886.  On  May 
27,  1887,  or  one  month  before  the  deal  was  closed,  according  to  the 
Economist's  supplement,  the  price  bid  was  $475  and  $600  asked.  As 
late  as  December  30,  1887,  the  price  asked  was  $700  per  share,  with 
no  bidders.  This  was  the  highest  price  asked  for  the  shares  at  any 
time  up  to  the  close  of  the  year  1887,  so  far  as  the  public  quotations 
show,  and  would  indicate  that  if  the  officers  of  the  Chicago  West 
Division  Ry.  Co.  were  in  a  position  to  guarantee  the  delivery  of 
6,251  shares  as  early  as  June,  1887,  the  price  stipulated  did  not  ex- 
ceed an  average  of  $656.  Even  if  the  transaction  was  still  open 
after  that  date,  the  price,  in  any  event,  did  not  exceed  $700  per 
share,  the  highest  quotation  reached  on  the  Chicago  Stock  Ex- 
change, if  such  quotations  are  any  indication  of  the  exchange  value 
of  the  stock. 

As  the  range  of  prices  asked  was  from  $600  on  May  27,  1887, 
to  $700  on  December  30,  1887,  it  naturally  follows  that  the  average 
price  was  between  the  two,  and  as  $4,100,000  in  bonds  was  issued  on 
the  deposit  of  6,251  shares,  this  would  make  the  average  value  of 
each  share  a  little  less  than  $656,  which  was  undoubtedly  the  aver- 
age price  paid  for  it. 

A  strong  reason  for  presuming  that  the  average  price  paid  for 


140  MUNICIPAL    AFFAIRS. 

the  stock  was  the  basis  for  the  issue  of  the  bonds  is  the  fact  that 
that  was  the  plan  previously  adopted  in  the  first  issue  of  bonds  by 
the  North  Chicago  St.  R.  R.  Co. ;  in  fact,  the  whole  general  plan  of 
financing  both  roads  was  precisely  similar  except  in  this  single  in- 
stance, if  the  assumption  set  forth  above  is  incorrect. 

The  statement  of  Mr.  Yerkes  that  the  entire  original  capital 
stock  of  $10,000,000  was  set  aside  to  pay  for  the  cable  system,  and 
that  the  actual  cost  was  $7,800,000,  makes  it  safe  to  presume  that 
the  usual  profit  of  20  per  cent,  was  contemplated  on  the  estimated 
cost.  Furthermore,  nothing  is  said  in  the  lease  of  November  17, 
1887,  about  $1,000,000  in  capital  stock  being  set  aside  as  part  pay- 
ment of  the  6,251  shares  of  West  Division  stock,  all  of  which  seems 
to  show  that  $4,100,000  in  bonds  was  issued  to  provide  the  funds 
with  which  to  pay  for  the  6,251  shares  of  West  Division  stock  and 
$1,000,000  in  stock  was  charged  to  the  cost  of  these  shares,  in 
order  to  allow  the  promoters  a  profit  of  that  amount  for  negotiat- 
ing the  sale. 

However  desirous  Mr.  Yerkes  and  his  associates  may  have 
been  to  secure  control  of  these  shares,  it  is  reasonable  to  suppose 
that  there  was  a  limit  to  the  price  they  were  willing  to  pay  for  them, 
and  this  limit  was  undoubtedly  the  earning  power  of  the  road 
itself.  As  has  already  been  stated,  the  net  earnings  for  the  first  ten 
months  of  1887  were  $364,161.85,  or  at  the  rate  of  35  per  cent,  per 
annum  on  the  capital  stock.  That  rate  was  actually  guaranteed  on 
the  6,249  shares  of  outstanding  free  stock,  and  by  depositing  the 
6,251  shares  in  trust  and  issuing  $4,100,000  5  per  cent,  bonds 
against  them  the  transaction  was  equivalent  to  a  guarantee  of  35 
per  cent,  on  the  6,251  shares  also.  To  have  issued  $5,100,000  in 
bonds  would  have  increased  the  guarantee  more  than  the  property 
was  earning,  which  would  have  been  to  assume  a  risk  inconsistent 
with  sound  financiering,  particularly  as  interest  had  also  to  be 
earned  on  the  new  capital  to  be  invested  in  developing  the 
property. 

This  fact  would  seem  to  show  more  than  anything  else,  that 
even  if  Widener,  Elkins  and  Kemble  were  the  actual  owners  of  the 
entire  6,251  shares,  and  not  merely  the  holders  of  an  option  on  all 
or  a  portion  of  them,  the  price  which  they  paid  to  obtain  them  did 
not  exceed  $4,100,000  in  the  aggregate,  and  as  the  $1,000,000  in 


CHICAGO    STREET    RAILWAYS.  141 

stock  paid  them  (in  addition  to  the  $4,100,000  bonds)  did  not  rep- 
resent any  outlay  in  money  on  their  part,  they  could  well  afford  to 
waive  any  immediate  share  in  the  earnings  of  the  company  until 
such  time  as,  under  their  management,  the  property  could  be  made 
to  develop  additional  earning  power. 

As  only  $14,100,000  in  stock  and  bonds  were  issued,  if  $5,100,- 
ooo  were  paid  for  the  6,251  shares  of  Chicago  West  Division  Ry. 
Co.  stock,  according  to  the  books,  then  only  $9,000,000  could  have 
been  set  aside  for  the  construction  of  the  cable  system,  which  is 
$1,000,000  less  than  Mr.  Yerkes  claims.  And  if  the  presumption  is 
that  Mr.  Yerkes  desires  to  make  the  profits  of  the  promoters  ap- 
pear as  little  as  possible,  he  loses  an  advantage  of  $1,000,000  by 
adhering  to  the  statement  that  $10,000,000  and  not  $9,000,000  was 
the  correct  amount,  for  it  would  seem  much  more  probable  that 
whatever  was  paid  out  for  the  6,251  shares  of  West  Division  stock 
went  to  the  original  owners  of  that  stock  than  that  the  promoters 
added  anything  to  the  cost  for  their  own  benefit,  especially  as  there 
was  no  particular  necessity  of  concealing  so  comparatively  small  a 
sum  as  $1,000,000  for  what  might,  under  some  conditions,  be  a 
reasonable  charge  for  their  services  in  securing  control  of  the  Chi- 
cago West  Division  Ry.  when  they  were  at  no  pains  to  conceal  a 
charge  of  $5,000,000  for  practically  the  same  service  in  giving  ex- 
pression to  that  control  in  a  formal  lease  of  the  road. 

See*  7.— Value  of  West  Chicago  Street  Railway  Stock. 

Considering  that  the  earnings  of  the  road  were  fully  mort- 
gaged by  the  guaranteed  rental  of  35  per  cent,  on  the  capital  stock 
of  the  Chicago  West  Division  Ry.,  leaving  the  prospective  increase 
in  earnings  to  take  care  of  the  $10,000,000  new  capital  of  the  West 
Chicago  St.  R.  R.  Co.,  it  has  suggested  itself  to  me  that  possibly 
the  last  named  stock  was  not  considered  as  worth  par  at  the  time 
of  its  issue,  or,  if  sold  in  the  market  to  provide  funds  to  construct 
the  proposed  cable  system  might  not  have  realized  the  full  $10,- 
000,000  in  cash. 

Such  a  supposition  finds  no  support  in  the  official  records  of 
the  Chicago  Stock  Exchange,  as  the  earliest  quotation  of  the  stock 
of  the  West  Chicago  St.  R.  R.  Co.  was  on  June  14,  1889,  to-wit: 
103  asked  and  102^  bid.    There  is  nothing  to  show  that  it  possessed 
any  lower  value  at  any  time  previous  unless  such  an  assumption 


142  MUNICIPAL     AFFAIRS.  j  ^ 

may  be  drawn  from  the  report  of  the  treasurer  of  the  company  for 
the  year  1888,  read  at  the  annual  meeting  of  the  stockholders  on 
January  8,  1889,  viz: 

Capital  stock,  including  $4,000,000  United  States  Construction  Company, 

held  to  complete  contract $10,000,000 

Bonded  indebtedness 4100,000 

C.  W.  Div.  Ry.  rental $437,5<x> 

interest 210,500 

maintenance  3,000 

Fixed  charges  $651,000 

Receipts,  1888 $2,846,395.74 

Expenses,  1888 2,890,302.05 


Deficit  $43,906.31 

Cash  on  hand  January  I,  1888 $185,373.71 

Less  deficit  43,906.31 

Balance  on  hand  January  i,  1889 $141,467.40 

This  report,  however,  does  not  indicate  the  true  condition  of 
the  company,  nor  agree  with  the  books  of  the  company,  which 
show  that  the  gross  receipts  and  operating  expenses  of  the  com- 
pany were  as  follows: 

Gross  receipts $2,835,002.35 

Operating  expenses  1,846,337.23 

Net  from  operation $988,665.12 

Deduct  interest  and  rentals 651,994.40 

Net  earnings $336,670.72 

Out  of  these  earnings  dividends  had  been  paid  at  regular  inter- 
vals during  the  year  as  follows:  April  28,  1888,  i\  per  cent.;  July 
26,  1888,  i£  per  cent.;  November  5,  1888,  ij  per  cent.;  and  at  the 
meeting  .of  the  directors  on  February  n,  1889,  a  further  dividend 
of  ij  per  cent,  was  paid,  thereby  establishing  the  stock  as  a  5  per 
cent,  per  annum  dividend  paying  security  as  early  as  April  28,  1888. 

Considering  that  the  construction  contract  provided  that  work 
on  the  cable  system  should  commence  within  30  days  of  the  grant- 
ing of  permission  by  the  City  of  Chicago,  and  that  such  permission 
was  not  issued  till  March  30,  1888,  or  accepted  by  the  company 
till  April  2,  1888,  it  is  very  evident  that  the  stock  had  an  estab- 
lished par  value,  if  not  higher,  before  a  dollar  of  it  was  disposed  of 
for  the  purpose  of  providing  funds  for  the  construction  of  the  cable 
system. 


CHICAGO   STREET   RAILWAYS.  143 

Sec.  8.— Capital  Expenditures,  1887-1897. 

The  total  expenditures  of  this  company  other  than  operating 
expenses,  that  is,  the  sum  expended  in  the  purchase  of  property, 
construction  and  reconstruction  of  roads,  buildings,  etc.,  from  date 
of  organization  down  to  December  31,  1897,  were  $29,615,628.13, 
distributed  as  follows: 

Chicago  Passenger  Railway $1,156,749.52 

Chicago  West  Division  Railway 14,969,998.38 

West  Chicago  Street  Railroad 13,488,880.23 

Total .$29,615,628.13 

The  following  schedules  show  the  details  for  each  of  the  roads 
named : 

CHICAGO    PASSENGER    RAILWAY. 

2.836  miles  single  track  horse  road,  converted  into  cable  road  by  the 

U.  S.  Construction  Company ;  contract  price  per  mile,  $164,723.65 . . .  $466,056.28 

0.314  mile  single  track  new  cable  road,  at  $139,221.37 43,715-51 

4.306  miles  S.  T.  new  horse  road,  at  $23,825.68 104,737.66 

2.01  miles  S.  T.  horse  road  converted  into  trolley  road,  at  $24,204.17. .. .  48,650.39 

26.575  miles  horse  road,  S.  T.,  converted  into  trolley,  at  $18,573.46 493,589.68 

Total    .$1,156,749-52 

CHICAGO  WEST  DIVISION   RAILWAY  COMPANY 

13.404  miles  single  track  horse  road  converted  into  cable  road  by  U.  S. 

Construction  Company,  at  $164,723.65 $2,207,955.82 

11.655  miles  single  track  new  cable  road,  built  by  West  Chicago  Street 

Railroad  Company,  at  $96,455.43 1,124,188.06 

0.321  mile  single  track  new  cable  road,  at  $139,221.37 44,690.05 

1.96  miles  single  track  new  horse  road 46,698.51 

68.68  miles  single  track  new  horse  road  converted  into  trolley  road,  at 

$11,985.48 825,163.04 

Western  avenue  electric  power  house 520,455.65 

Halsted  street  car  house  improvements 11,803.70 

New  building,  Clybourn  Place 52,839.50 

Miscellaneous  items 36,204.05 


Total  expenditures  for  betterments $4,869,998.38 

Add  payments  to  Widener,  Elkins  &  Kemble — 

For  controlling  interest  in  the  stock  of  the  Chicago  West  Division 

Railway  Company 5,100,000.00 

For  securing  lease  of  the  Chicago  West  Division  Railway  Company.    5,000,000.00 


Total $14,969,998.38 

WEST  CHICAGO   STREET  RAILROAD. 

1.23  miles  single  cable  road,  built  by  U.  S.  Construction  Company;  con- 
tract price,  $164,723.65  per  mile $203,710.09 

Three  power  houses  and  machinery,  built  by  U.  S.  Construction  Co 998,277.81 

155  grip  cars,  built  by  U.  S.  Construction  Company 124,000.00 


144 


MUNICIPAL    AFFAIRS. 


50.32  miles  single  track  horse  road,  built  by  West  Chicago  Street  Rail- 
road Company,  at  $22,409.57 1,132,178.36 

25.97  miles  single  track  new  trolley  road,  built  by  West  Chicago  Street 

Railroad  Company,  at  $18,573.46 482,352.76 

50.32  miles  single  track  horse  road  converted  into  trolley  road,  at  $11,- 

985-48   601,109,45 

Miscelleaneous  items  charged  to  construction  account — 

Taylor  street  bridge $100,000.00 

Taylor  street  viaduct 7,654,55 

Halsted  and  Kedzie  street  viaducts 2,427.88 

Ogden  avenue  viaduct 7,861.90 

Milwaukee  avenue  viaduct 1,000.00 

Steel  rails  and  asphalt  for  Madison  street 52,376.18 

Franchise  petitions 207,321.37 

Interest  and  dist.  on  bonds 282,972.12 

661,614.00 

Equipment — 

Horse  cars  $29,030.00 

Grip  cars,  trailers,  etc 962,956.01 

Electrical  equipment 764,956.10 

1,756,942.11 

Machinery — 

Blue  Island  avenue  power  house $173,240.47 

Van  Buren  street  power  house 116,627.53 

Desplaines  street  power  house 72,971.69 

Washington  street  power  house  improvements 54,685.68 

Miscellaneous 53>455-65 

470,981.02 

Electrical  ronduits,  Western  avenue 79,112.64 

Miscellaneous  property  in  use — 

Car  heaters $32,944.56 

Registers  43,638.95 

Storehouse  supplies  9,058.63 

Horses 29,902.50 

Telephone  and  signal  system 3,483.80 

Car  shop  stock 21,108.27 

Cables    112,285.39 

Punches    69.70 

Gripmen's   tools 182.54 

Hay    142.94 

252,817.28 

Advance  to  feeder  lines  and  connections — 

Cicero  &  Proviso  Street  Railway  Company $159,510.10 

Ogden  Street  Railway  Company 398,662.42 

Lake  Street  Elevated  Railroad  Company 20,077.15 

Chicago  &  Jefferson  Urban  Transit  Company 7,911. 23 

Suburban   Railroad  Company 18,139.31 

North  Chicago  Street  Railroad  Company 46,586.65 

North  Chicago  Electric  Railway  Company 15,250.76 

Chicago  Electric  Transit  Company 931-22 

West  Chicago  Street  Railroad  Tunnel  Company 118,236.45 

785,305.29 

Accounts  receivable — 

Naugle,  Holcomb  &  Co $856.07 

City  of  Chicago 2,595.25 

Suspense   8,980.75 

Sinking  fund 31,000.00 

Central  Trust  Company  of  New  York,  to  redeem  cer- 
tificates of  Ind. . : 840,304-44 


CHICAGO    STREET    RAILWAYS.  145 

Central  Trust  Company  of  New  York  to  redeem  coupons  129,000.00 

Bank  of  America,  New  York,  to  redeem  coupons 2,850.00 

Track  depression 12,244.48 

1,027,920.99 


Bills  receivable 86,969.98 

Stocks  and  bonds — 

West  Chicago  Street  Railroad  Debentures $3,211,000.00 

Chicago  &  Jefferson  Urban  transit  bonds 54,000.00 

West  Chicago  Railroad  Consols 15,000.00 

West  Chicago  Railroad  stocks 22,264.00 

3,302,264.00 

Real  estate  and  buildings — 
Prior  to  introduction  of  trolley  system — 

For  cable  roads $644,084.59 

For  horse  roads 173,681.77 


$817,766.36 
Less    charge    to    Chicago    Western    Division    Railroad 

Company $64,643.20 


$753,123.16 

Since  introduction  of  trolley  system $670,963.48 

Miscellaneous   improvements 96,557.98 

Special  assessments 2,679.83 

$  i,523,324-4S 

Total  $13,488,880.23 

Of  the  property  represented  by  the  above  expenditures  there 
existed  December  31,  1897,  the  following  items  at  their  original 
cost  value : 

CHICAGO  PASSENGER   RAILWAY. 

2.836  miles  single  track  cable  road  built  by  United  States  Construction 
Company;  contract  price,  $164,723.65  per  mile;  estimated  price, 

$96,455-43  Per  mile $273,547.60 

0.314  mile  single  track  cable  at  $139,221.37 43,715-51 

2.01  miles  single  track  trolley  at  $24,204.17 48,650.39 

26.575  miles  single  track  trolley  at  $18,573.46 493,589.68 

Total    $859>503-i8 

Showing  a  depreciation  of  $297,246.34  as  follows :  4.396  miles 
new  horse  road  torn  up  and  trolley  road  built  in  its  place ;  original 
cost  of  horse  road,  4.396  miles,  at  $23.825.68,  total  $104,737.66,  and 
$192,508.68  difference  between  contract  price  and  estimated  cost 
of  2.836  miles  cable  road  built  by  U.  S.  Construction  Co. 

CHICAGO  WEST  DIVISION  RAILWAY. 

13.404  miles  single  track  cable  road  built  by  U.  S.  Construction  Com- 
pany; contract  price,  $164,723.65  per  mile;  estimated,  $96,455.43 
per  mile $1,292,888.56 

11.655  miles  single  track  cable  road  built  by  West  Chicago  Street  Rail- 
road Company ;  actual  cost  per  mile,  $96,455.43 1,124,188.06 

0.321  mile  single  track  cable  road  built  by  West  Chicago  Street  Rail- 
road Company ;  actual  cost  at  $139,221.37 44,690.05 


146  MUNICIPAL     AFFAIRS. 

68.68  miles  single  track  trolley  road  converted  from  horse  road ;  actual 

cost  of  converting,  $11,985.48 825,163.04 

Western  avenue  power  house,  building $155,535-55 

Western  avenue  power  house,  machinery 364,920.10 

520*455-65 

Halsted  street  car  house  improvements 11,80370 

New  building,  Clybourn  Place 52,839.50 

Total    $3,872,028.56 

Showing  a  depreciation  of  $11,097,969.82  as  follows: 
Difference  in  contract  price  and  estimated  cost  of  the   13.404  miles 

cable  road  built  by  the  U.  S.  Construction  Company $915,067.26 

1.96    miles    single    track    horse    road    converted    into    trolley    road; 

original  cost  of  horse  road,  $23,825.68  per  mile 46,698.51 

Miscellaneous  expenditures  covered  by  the  above  values 36,204.05 

Price  paid  Widener,  Elkins  &  Kemble  for  6,251  shares  of  Chicago 
West  Division  Railway  Company  stock;  omitted  as  an  asset 

for  reasons  that  will  appear  later 5,100,000.00 

Price  paid  Widener,  Elkins  &  Kemble  for  negotiating  the  lease  of  the 
Chicago  West  Division  Railway  Company  to  the  West  Chicago 
Street  Railroad  Company 5,000,000.00 

Total   $11,097,969.82 

WEST  CHICAGO  STREET  RAILROAD. 

1.23  miles  single  track  cable  road  built  by  U.  S.  Construction  Com- 
pany; contract  price,  $164,723.65  per  mile;  estimated  price  per 
mile,  $96,45543 $i  18,640.18 

25.97  miles  single  track  new  trolley  road,  complete,  including  street 

paving,  at  $18,573.46 482,352.76 

50.32  miles  single  track  trolley  road  converted  from  horse  road ;  actual 
cost  of  converting  same,  $11,985.48  per  mile.  Total,  $601,109.45. 

50.32  miles  of  street  pavement  relaid,  originally  part  of  50.32  miles 
single  track  horse  road  torn  up  and  replaced  with  trolley  road. 
Total  square  yards,  236,168,  divided  as  follows: 

19,712  square  yards  Granite  at  $2.00 $39,424.00 

23,607  square  yards  Cobble  at    1.25 29,508.75 

192,849  square  yards  Wood    at    i.oo 192,849.00 

236,168  Total $261,781.75 

Add  cost  of  converting  above 601,109.45 

50.32  miles  single  track  trolley,  complete,  at  $17,148.08 862,891.20 

Equipment  on  hand  December  31,  1897 — 

364  box  cars  at  $900 $327,600 

421  open  cars  at  $725 305,225 

258  grip  cars  at  $650 167,700 

401  box  motor  cars  at  $1,000 401,000 

415  open  motor  cars  at  $825 342,375 

i  trolley  party  car,  $1,200 1,200 

5  mail  cars  at  $000 ' 4,5OO 

36  sweepers   at  $300 10,800 

49  snow  plows  at  $400 19,600 

35  salters  at  $200 7,ooo 


CHICAGO   STREET    RAILWAYS.  147 

7  sprinklers  at  $250 1,750 

60  other  vehicles  at  $100 6,000 

1.594750-00 

(The  details  of  the  remaining  items,  as  well  as  the  totals,  are  the  same 

as  in   the  schedule  of  expenditures  given   on  a  preceding  page, 
nothing  being  marked  from  the  original.) 

Machinery   $470,981.02 

Electric  conduits,  Western  avenue 79,112.64 

Three  power  houses  and  machinery  built  by  U.  S.  Construction  Com- 
pany (see  estimate) 998,277.81 

Miscellaneous  property  in  use 252,817.28 

Due  from  feeder  lines  and  connections 785,305.29 

Accounts  receivable 1,027,920.99 

Bills   receivable 86,969.98 

Stocks  and  bonds 3,302,264.00 

Miscellaneous  real  estate  and  buildings 1,523,324.45 

Total  $11,585,607.60 

Total  expended,  West  Chicago  Street  Railroad  Company $13,488,880.23 

Total  cost  value  of  property  existing  December  31,  1897 11,585,607.60 


Depreciation   $1,903,272.63 

Following  are  the  details  of  the  depreciation: 
Difference  in  contract  price  and  estimated  cost  of  the  1.23  miles  single 

track  cable  road  built  by  the  U.  S.  Construction  Company $85,069.91 

50.32  miles  single  track  horse  road  converted  into  trolley  road ;  original 
cost,  $1,132,178.36.    Deduct  for  street  pavement  relaid.  .$261,781.75 

870,396161 

Depreciation  in  equipment 286,192,1 1 

Miscellaneous  items  charged  to  construction  account 661,614.00 

Total   $1,903,272,63 

SUMMARY. 

Total  expendi-  Cost  value  assets 

tures.  December  31, 1897.  Depreciation. 

Chicago  Passenger  Railway $1,156,749.52  $859>503-i8  $297,246.34 

Chicago  West  Division  Railway.  14,969,998.38  3,872,028.56  11,097,969.82 

West  Chicago  Street  Railroad..  13,488,880.23  11,585,607.60  1,903,272.63 


Totals  $29,615,628.13  $i6,3i7,i39-34  $13,298488.79 

Sec.  9.— Financial  Condition,  J897. 

The  lease  of  March  15,  1889,  with  the  Chicago  Passenger  Ry. 
stipulated  that  the  2.836  miles  horse  road  of  that  company  con- 
verted into  cable  road  was  to  be  paid  for  by  the  West  Chicago  St. 
R.  R.  Co.  The  contract  price  paid  the  U.  S.  Construction  Com- 
pany for  converting  the  road  was  $164,723.65  per  mile,  or  $466,- 
056.28,  and  this  amount  should  be  transferred  in  the  above  sum- 
mary from  the  Chicago  Passenger  Ry.  account  to  that  of  the  West 


148  MUNICIPAL    AFFAIRS. 

Chicago  St.  R.  R.,  leaving  the  cost  value  $273,547.60  to  stand,  as 
it  is,  in  the  second  column,  since  the  improvement  accrues  to  the 
first  named  company. 

The  $5,100,000  representing  the  6,251  shares  of  the  Chicago 
West  Division  Ry.  Co.  and  the  $5,000,000  paid  for  negotiating  the 
lease  of  that  company  should  likewise  be  transferred  in  the  sum- 
mary from  the  Chicago  West  Division  Ry.  account  to  that  of  the 
West  Chicago  St.  R.  R. 

There  should  also  be  taken  into  account  the  settlement  by 
arbitration  May  9,  1896,  between  the  Chicago  Passenger  Ry.  Co. 
and  its  lessee,  by  the  terms  of  which  the  former  company  wa* 
charged  with  $250,000  as  its  proportion  of  the  Western  Ave.  elec- 
tric power  house,  and  the  fact  that  that  company  actually  paid  to 
the  lessee  company  $891,534.75,  part  of  which  was  on  account  of 
the  award  mentioned,  although  the  improvement  was  actually  to 
the  property  of  the  Chicago  West  Division  Ry.  Co. 

With  the  changes  noted  a  new  summary  would  be  as  follows : 

SUMMARY  NO.  2. 

Expenditures.      Cost  value  assets.        Appreciation. 

Chicago  Passenger  Railway $49,158.49  $859,503.18  $810,344.69 

Depreciation. 

Chicago  West  Division  Railway    4,869,098.38  3,872,028.56  097,969.82 

West  Chicago  Street  Railroad..  23,804,936.51  11,585,607.60  12,219,328.91 

Total  $28,724,093-38  $16,317,139.34  $12,406,954-04 

It  will  be  remembered  that  at  the  time  of  the  lease  of  the 
balance  in  the  hands  of  the  West  Chicago  St.  R.  R.  Co.  on  Decem- 
ber 31,  1897,  the  sum  will  represent  the  total  book-value  of  the 
assets  of  that  company  on  the  date  mentioned. 

If  to  the  total  of  the  first  column  is  added  the  $353,972.19  cash 
Chicago  Passenger  Ry.  there  was  turned  over  to  the  West  Chi.  St , 
R.  R.  Co.  real  estate  and  buildings  representing  a  cost  value  of 
$661,202.99,  and  subsequently  another  piece  of  property  costing 
$100,000,  making  a  total  of  $761,202.99,  representing  real  estate 
and  buildings,  still  in  the  possession  of  the  lessee  company  Decem- 
ber 31,  1897. 

There  was  also  transferred  29.79  miles  single  track  horse  road, 
representing  a  cost  value  of  $709,767.01,  of  which  2.38  miles  only, 
representing  a  cost  value  of  $56,705.12,  remained  on  December 
3i.  l897- 


CHICAGO   STREET   RAILWAYS.  149 

There  was  also  98.45  miles  single  track  horse  road  of  the  Chi- 
cago West  Division  Ry.  transferred  at  the  date  of  the  lease  of  that 
road  by  the  West  Chicago  St.  R.  R.  Co.,  of  which  6.26  miles,  repre- 
senting a  cost  value  of  $123,046.43,  remained  in  existence  Decem- 
ber 31,  1897. 

The  real  estate  and  buildings  of  the  Chicago  West  Division 
Ry.  Co.  existing  at  the  date  of  the  lease,  and  still  in  the  possession 
of  the  West  Chicago  St.  R.  R.  Co.  on  December  31,  1897,  repre- 
sented a  cost  value  of  $449,158.73  and  $927,984  respectively.  In 
the  subsequent  conversion  of  part  of  the  old  horse  road  into  trolley 
road,  7.97  miles  of  granite  pavement,  16.603  miles  wood  and  44.107 
miles  of  cobble  pavement,  representing  an  aggregate  cost  value  of 
$411,495.93,  was  relaid  and  now  forms  part  of  the  present  trolley 
road. 

If  these  items  were  incorporated  into  the  above  summary  they 
would  produce  the  following  result,  viz: 

SUMMARY  NO.  3. 

Book  value  assets.  Cost  value.  Depreciation. 

Chicago  Passenger  Railway $49,158.49  $1,677,411.29  $1,628,252.80 

Chicago  West  Division  Railway.     4,869,098.38  6,783,713.65  9*3,715.27 

West  Chicago  Street  Railroad. .  24,158,908.70  11,585,607.60  12,573,301.10 

Totals   $29,078,065.57  $19,046,732.54  $10,031,333.03 

The  cost  value  of  the  assets  of  the  two  lessor  companies  are 
apparently  in  excess  of  the  book  value,  according  to  the  last  sum- 
mary, but  this  is  because  the  first  column  shows  the  liabilities  of 
these  companies  to  the  West  Chicago  St.  R.  R.  Co.  only,  whereas, 
if  the  remaining  liabilities  are  considered,  the  result  would  be  as 
follows : 

SUMMARY  NO.  4. 

Total  Cost  value  of 

Liabilities.  Properties.  Deficit. 

Chicago  Passenger  Railway....  $3,123,458.49  $1,677,411.29  $1,446,047.20 

Chicago  West  Division  Railway.  10,189,908.38               5,783,713.65  4,406,284.73 

West  Chicago  Street  Railroad..  28,358,252.67  11,585,607.60  16,772,645.07 


Totals  $41,671,709.54  $19,046,732.54  $22,624,977.00 

The  liabilities  in  detail  are  as  follows: 

Chi.  Pass.  «hi.  W.  Div.  W.  Chi.  St. 

Ry.  Co.  Ry.  Co.  R.  R.  Co. 

Capital    stock $1,340,300.00  $1,250,000.00  $13,189,000.00 

First  mortgage  bonds 400,000.00  4,070,000.00  3,069,000x0 

Co»sol  mortgage  bonds 1,334,000.00                6,031,00000 


150  MUNICIPAL    AFFAIRS. 

Certificates  of  Ind. : 

June  i,  1891 $2,000.00 

December  i,  1891 3,000.00 

December  i,  1894 3,937,000.00 

Due  W.  Chicago  St.  Railroad. .         49,158.49  4,869,998.38                

Miscellaneous    1,227,252.67 

Totals   $3,123,458.49  $10,189,998.38  $28,358,252.67 

It  will  be  noticed  that  the  bonded  indebtedness  of  the  Chicago 
Passenger  Ry.  Co.  and  of  the  West  Chicago  Street  R.  R.  Co.  is 
greater  than  the  value  of  the  property  mortgaged  to  secure  its  pay- 
ment, and  that  while  the  cost  value  of  the  property  of  the  Chicago 
West  Division  Ry.  Co.  is  $1,713,713.65  in  excess  of  the  bonded 
indebtedness  of  that  company,  this  excess  falls  $3,156,284.73  short 
of  being  sufficient  to  liquidate  the  claim  of  the  West  Chicago  St. 
R.  R.  Co.  for  $4,869,998.38  expended  for  betterments  to  the  prop- 
erty of  the  Chicago  West  Division  Ry.  Co.  It  will  also  be  noticed 
that  the  assets  of  neither  of  the  three  roads  are  sufficient  to  pay 
their  bonded  and  floating  indebtedness  and  leave  any  residue  for 
the  redemption  of  the  capital  stock,  as  will  be  seen  by  the  following 
statement : 

Bonds  and  float-         Cost  value  of 

ing  debt.  property.  Deficit. 

Chicago  Passenger  Ry.  Co $1,783,158.49  $1,677,411.29  $105,747.20 

Chicago  West  Division  Railway    8,939,998.38  6,783,713.65  3,156,284.73 

West  Chicago  Street  Railroad. .  15,169,252.67  13,299,321.25  1,869,931.42 

Totals  $25,892,409.54  $20,760,446.19  $5,131,963.35 

Add  to  this  the  capital  stock  and  we  have  the  total  deficit  as 
follows : 

Deficit  as  above.  Capital  stock.  Total  deficit. 

Chicago  Passenger  Ry.  Co $105,747.20  $1,340,300.00  $1,446,047.20 

Chicago  West  Division  Railway.     3,156,284.73  1,250,000.00  4,406,284.73 

West  Chicago  Street  Railroad. .     1,869,931.42  13,189,000.00  15,058,931.42 

Totals  $5,131,963.35  $15,779,300.00  $20,911,263.35 

Sec.  JO.— Cost  of  Cable  Construction. 

As  already  fully  explained  on  a  preceding  page,  it  has  been 
necessary  to  estimate  the  detailed  cost  of  the  original  cable  system, 
built  under  contract  by  the  U.  S.  Construction  Co.,  in  order  to  com- 
plete the  foregoing  summary,  and  as  the  cost  thus  incorporated  is 
not  conclusive,  and  at  best  only  approximates  the  actual  cost,  it 
ma^  not  be  out  of  place  to  submit  for  consideration  at  this  time 
the  following  facts  upon  which  the  estimate  in  detail  is  based : 


CHICAGO    STREET    RAILWAYS.  151 

The  lease  of  October  20,  1887,  provided  for  the  construction 
of  "at  least  17  miles"  of  fully  equipped  and  operative  cable  road, 
with  all  the  necessary  power  houses,  machinery  and  equipment. 
The  books  of  the  West  Chicago  St.  R.  R.  Co.  show  that  $4,000,000 
was  paid  to  the  U.  S.  Construction  Co.  for  the  system  complete, 
and  the  payment  is  represented  in  the  books  by  the  single  entry  of 
that  amount  to  the  debit  of  construction  account.  No  details  are 
given  in  the  books,  nor  have  I  been  able  to  find  on  file  any  schedule 
of  any  character  from  which  to  make  up  a  list  of  the  property  trans- 
ferred and  its  cost  value,  either  in  detail  or  bulk.1  At  the  same 
time,  such  estimates  as  have  been  incorporated  into  this  report  are 
approximately  correct,  and,  therefore,  do  not  detract  materially 
from  the  value  of  the  report  itself. 

In  one  sense  these  estimates  are  preferable  to  the  records 
themselves,  as  the  singular  fact  is  presented  of  Mr.  Yerkes  dis- 
puting the  official  records  of  his  own  company.  In  other  words, 
the  records  show  that  $4,000,000  was  paid  to  the  U.  S.  Construc- 
tion Co.  for  the  original  West  Side  cable  system,  whereas  Mr. 
Yerkes  states  that  the  actual  cost  was  $7,800,000.  Where  authori- 
ties disagree  in  this  manner,  estimates  are  not  only  permissible  but 
necessary. 

From  the  records  of  the  engineers'  department,  I  learn  that 
the  U.  S.  Construction  Co.  built  17.47  miles  single  track  cable  road, 
and  from  other  sources  I  find  that  three  power  houses,  with  neces- 
sary machinery,  were  also  built  by  that  company.  Finally,  if  it  is 
assumed  that  all  the  grip  cars  now  in  use  on  the  Madison  St.  and 
Milwaukee  Ave.  cable  system,  or  a  like  number,  were  originally 
built  by  the  U.  S.  Construction  Co.,  practically  all  the  construction 
work  done  by  that  company  will  be  covered. 

Subsequently,  and  without  the  intermediation  of  any  construc- 
tion company,  the  West  Chicago  St.  R.  R.  Co.  built  the  Blue 
Island  Ave.,  Halsted  and  Van  Buren  St.  cable  system,  the  detailed 

1  The  absence  of  any  such  record  does  not  necessarily  imply  any  irregularity 
in  the  accounts  of  the  West  Chicago  Street  Railroad  Company,  as  such  details,  under 
the  circumstances,  would  naturally  be  found  only  in  the  books  of  the  U.  S.  Con- 
struction Company,  but,  as  access  to  these  books  has  been  denied,  or  rather  their 
whereabouts  stated  to  be  unknown,  and  as  the  information  which  they  contain  is 
absolutely  essential  to  a  correct  and  perfect  understanding  of  the  situation,  no 
option  is  presented  but  to  supply  any  deficiency  in  figures  with  well  considered  esti- 
mates, or  else  abandon  any  attempt  to  arrive  at  a  satisfactory  conclusion  altogether. 


152  MUNICIPAL    AFFAIRS. 

cost  of  which  is  clearly  set  forth  in  the  books  of  account  of  that 
company. 

A  comparison  of  the  mileage  of  the  two  systems  referred  to 
shows  that  40  per  cent,  of  the  total  cable  lines  on  the  West  Side 
compose  the  Blue  Island  Ave.,  Halsted  and  Van  Buren  St.  system. 
This  system  is  operated  by  two  power  houses,  the  cost  of  which, 
including  machinery,  was  $665,484.94. 

Assuming  that  the  same  ratio  of  power  to  mileage  is  required 
on  the  section  built  by  the  U.  S.  Construction  Co.  as  on  the  section 
built  by  the  West  Chicago  St.  R.  R.  Co.  itself,  and  that  a  corre- 
sponding ratio  obtains  in  the  relative  cost  of  the  power  plants,  the 
cost  of  the  three  power  houses  and  machinery  built  by  the  U.  S. 
Construction  Co.  would  be  approximately  $998,277.81,  exclusive  of 
the  land,  which,  under  the  contract,  was  to  be  provided  by  the 
R.  R.  Co. 

There  is  good  reason  to  believe  that  this  is  a  high  estimate 
and  that  the  actual  cost  was  much  less,  as  a  brief  description  of  the 
several  power  houses  will  show. 

In  the  Washington  street  power  house  are  "two  simple,  non-condensing  engines, 
36x60  inches,  1,000  horse  power  each,"  to  quote  from  a  semi-official  publication  of 
the  company.  One  of  these  engines  is  held  in  reserve,  while  the  other  operates  the 
Washington  street  tunnel  and  State  street  loop  cable. 

In  the  Milwaukee  avenue  power  house  are  two  Corliss  engines,  36x72,  1,000 
horse  power  each.  Two  20  feet  diameter  fly  wheels,  weighing  75,000  pounds  eack. 
One  of  the  engines  is  held  in  reserve,  as  in  the  Washington  street  power  house. 

In  the  Rockwell  street  power  house  are  two  engines,  1,400  horse  power  each. 
The  same  publication  referred  to  above  speaks  of  these  three  power  houses  as  fol- 
lows :  "The  three  power  houses  mentioned  above,  having  been  built  at  the  same 
time,  are  very  similar  in  design ;  the  one  at  Rockwell  street  is  almost  an  exact  dupli- 
cate of  the  Milwaukee  avenue  plant." 

In  another  place  this  publication  refers  to  the  Blue  Island  avenue  power  plant, 
calling  particular  attention  to  the  fact  that  "the  part  of  the  building  where  the 
machinery  is  located  is  116x100  feet,"  and  that  "the  site  was  an  extremely  difficult 
one  on  which  to  erect  a  heavy  building.  Quick-sand  was  encountered  and  the  exca- 
vations for  the  foundations  had  to  be  extended  40  feet  below  the  surface  of  the 
street  Eight  hundred  thousand  brick,  laid  in  Portland  cement,  were  used  in  the 
engine  foundations  alone.  The  station  is  one  of  the  most  complete  cable  plants 
eTer  built,  and  embodies  all  the  improvements  that  had  been  made  in  the  other 
Chicago  cable  power  houses,  as  well  as  those  of  San  Francisco,  Philadelphia,  etc,** 

Three  cables  "are  operated  from  this  power  house  by  "two  Allis  engines,  40x72 
inches  each,  being  rated  at  1,800  horse  power  under  steam  pressure  of  100  pounds. 
The  fly  wheels  are  24  feet  in  diameter  and  weigh  100,000  pounds  each." 

The  Van  Buren  street  power  house  is  rated  second  to  the  Blue  Island  avenue 
power  house  by  the  same  publication,  having  two  Allis  engines  30x60  inches  each, 


CHICAGO   STREET   RAILWAYS.  153 

1,300  feorse  power,  fly  wheels  weighing  100,000  pounds  each  and  measuring  20  feet 
in  diameter. 

It  is  more  than  probable  that  the  cost  of  the  last  two  power 
houses,  viz:  $665,484.94,  equalled  the  cost  of  the  other  three;  the 
estimate  of  $998,277.81,  however,  is  consistent  with  the  mileage 
operated,  and  does  no  injustice  to  the  company  in  an  effort  to  estab- 
lish the  first  cost  of  the  original  cable  plant,  since  the  accounts  giv- 
ing the  actual  cost  are  not  produced. 

The  electric  plant  for  the  Washington  St.  tunnel  is  situated  in 
the  Washington  St.  power  house  and  included  in  the  estimated  cost 
of  that  structure.  No  material  improvements  were  made  to  the 
tunnel  proper  by  the  U.  S.  Construction  Co.,  beyond  the  paving 
and  laying  of  the  cable  track,  all  of  which  cost  is  included  in  the 
cost  of  the  general  mileage  of  17.47  miles  single  track  cable  built 
by  the  Construction  Co.  The  actual  reconstruction  of  the  tunnel 
was  done  in  1892  and  1893,  and  cost  $28,752.96,  which  was  paid  for 
by  the  Chicago  Passenger  Ry.  Co.  independent  of  the  original  con- 
struction contract  of  November  17,  1887. 

There  remains  only  to  estimate  the  equipment  furnished  by 
the  U.  S.  Construction  Co.  to  complete  the  expenditures  made  by 
that  company  under  the  construction  contract.  Of  the  258  grip 
cars  now  owned  by  the  West  Chicago  St.  R.  R.  Co.,  40  per  cent, 
are  doubtless  required  for  the  Blue  Island  Ave.  and  Van  Buren  St. 
system,  leaving  155  for  the  Madison  St.  and  Milwaukee  Ave.  lines. 
The  cost  of  grip  cars  on  the  Chicago  City  Ry.  Co.  in  1882,  was 
$836.58  each,  and  in  1888  $819.71  each.  Assuming  the  cost  in  1890 
to  have  been  $800,  and  that  all  the  grip  cars  now  operated  by  the 
Madison  St.  and  Milwaukee  Ave.  systems,  or  a  like  number,  were 
built  by  the  U.  S.  Construction  Co.,  the  cost  of  155  would  be 
$124,000. 

It  is  fair  to  assume  that  no  passenger  cars  were  furnished  by 
the  U.  S.  Construction  Co.,  as  I  find  a  charge  on  the  books  of  the 
company  of  $174,188.92  for  that  purpose;  $16,539.20  in  1888,  $49,- 
976.71  in  1889,  and  $107,673.01  in  1890,  which,  on  an  average  of 
$731  for  open  cars  and  $1,055  for  closed  cars,  would  provide  200 
new  cars,  in  addition  to  the  793  cars  received  from  the  Chicago 
West  Division  Ry.  Co.  In  1891,  $57,789.77  was  paid  out  for  new 
cars,  and  in  1892  $345,630.60,  all  independent  of  any  cars  that  may 
have  been  furnished  by  the  U.  S.  Construction  Co. 


154  MUNICIPAL    AFFAIRS. 

Comparing  the  mileage  and  traffic  of  the  company  to-day  and 
its  1,865  cars  with  the  mileage  and  traffic  in  1890,  the  993  cars  ac- 
counted for  above  were  amply  sufficient  to  operate  the  road  at  that 
time. 

Deducting  the  estimated  cost  of  the  power  house  and  machin- 
ery and  equipment  ($1,122,277.81)  from  the  total  $4,000,000  paid 
under  the  contract,  leaves  $2,877,722.19  to  cover  the  cost  of  the 
17.47  miles  single  track  cable  road  built,  which  would  be  at  the 
rate  of  $164,723.65  per  mile.  That  this  is  greatly  in  excess  of  the 
cost  actually  incurred  by  the  U.  S.  Construction  Co.  may  be  in- 
ferred from  several  facts  that  are  clearly  established  by  the  records 
of  the  several  companies. 

(1)  The  actual  cost  of  the  17.898  miles  of  cable  road  on  the 
South  Side,  north  of  39th  St.,  including  the  down-town  loop,  was 
$1,470,868.27,  or  at  the  rate  of  $82,180.60  per  mile. 

(2)  Six  miles   of  single   track   cable  road  extension  subse- 
quently built  on  State  St.  south  of  39th  St.  cost  $330,042.82,  or  at 
the  rate  of  $55,006.80  per  mile,  and  9.687  miles  single  track  cable 
extension  south  on  Cottage  Grove  Ave.  cost  $575,408.63,  or  $59,- 
400.09  per  mile. 

(3)  The  actual  cost  of  the  11.655  miles  single  track  cable 
road  constituting  the  Blue  Island  Ave.,  Halsted  and  Van  Buren  St. 
line,  including  the  Adams  St.  loop,  was  $1,124,188.06,  or  at  the  rate 
of  $96,455.43  per  mile,  according  to  the  books  of  the  West  Chicago 
St.  R.  R.  Co. 

(4)  The  State  St.  loop  extension  of  the  West  Chicago  St. 
R.  R.  Co.  cost  $88,405.56,  or  at  the  rate  of  $139,221.37  per  mile,  and 
the  cost  of  the  0.667  mile  single  track  cable  road  built  by  the 
Chicago  City  Ry.  Co.  in  the  construction  of  its  new  loop  on  Mich- 
igan Ave.  was  $57,025.71,  or  at  the  rate  of  $85,495.82  per  mile. 

(5)  The  contract  price  for  the  construction  of  th«*  4.459  miles 
single  track  cable  road  on  Clybourne  Ave.  from  the  terrnius  near 
Fullerton  Ave.  to  Division  St.,  and  on  Division  St.  to  the  junction 
with  the  cable  line  on  Wells  St.,  at  that  point,  including  an  under- 
ground conduit  from  that  point  continuing  on  Division  St.  to  North 
Clark  St.,  and  thence  South,  connecting  with  the  power  house  on 
North  Clark  St.,  was  $500,000.    Making  no  allowance  for  the  4,000 
lineal  feet  of  cable  conduit,  but  apportioning  the  entire  sum  to  the 


CHICAGO   STREET   RAILWAYS.  165 

4.459  miles  single  track  cable  road,  makes  the  average  cost  per 
mile  $112,132.77.  This  contract  was  taken  by  the  U.  S.  Construc- 
tion Co. 

If  a  comparison  of  the  cost  of  the  different  sections  of  cable 
road  referred  to  above  does  not  prove  conclusively  that  the  actual 
cost  of  the  17.47  miles  single  track  cable  road  built  by  the  U.  S. 
Construction  Co.  for  the  West  Chicago  St.  R.  R.  Co.  was  less  than 
$164,723.65  per  mile,  the  contract  price,  it  at  least  shows  that  the 
cost  was  not  $6,677,722.19,  or  $382,240  per  mile  single  track,  which 
would  be  the  rate  per  mile  if  $7,800,000  was  the  actual  cost  of  the 
system,  according  to  Mr.  Yerkes. 

To  show  more  clearly  the  extreme  improbability  that  $382,240 
was  the  actual  cost  per  mile,  it  is  only  necessary  to  call  attention 
to  the  fact  that  at  that  rate  one  average  mile  of  cable  road  on  the 
West  Side  cost  $52,197.18  more  than  the  six  miles  of  cable  road  on 
State  St.  South  of  39th  St.;  more  than  six  times  as  much  per  mile 
as  the  cable  road  on  Cottage  Grove  Ave.  south  of  39th  St. ;  nearly 
five  times  as  much  per  mile  as  the  first  experimental  section  of 
cable  road  built  in  Chicago,  with  all  the  subsequent  expenditures 
for  changes  and  improvements  to  bring  it  up  to  its  present  degree 
of  efficiency ;  more  than  four  times  as  much  per  mile  as  a  road  of  a 
precisely  similar  character  built  according  to  the  same  specifica- 
tions by  the  West  Chicago  St.  R.  R.  Co.  itself;  $100,000  per  mile 
more  than  the  State  St.  loop  extension  built  by  the*  same  company ; 
and  nearly  five  times  as  much  per  mile  as  the  Michigan  Ave.  loop 
extension  of  the  Wabash  Ave.  line,  both  of  which  extensions,  be- 
cause of  their  location  in  the  business  district,  where  the  sewer,  gas 
and  water  pipe  obstructions  are  the  greatest,  show  a  cost  of  con- 
struction much  greater  than  in  outlying  sections  of  the  city ;  finally, 
$82,000  per  mile  more  than  the  contract  price  with  the  same  Con- 
struction Company  for  the  construction  of  the  entire  cable  system 
on  the  North  Side,  including  all  power  houses  and  machinery,  the 
construction  of  the  Wells  St.  and  Clark  St.  bridges,  and  the  recon- 
struction of  the  Dearborn  St.  bridge  and  La  Salle  St.  tunnel,  etc., 
etc.1 

1  Reference  might  also  be  made  to  the  following  answer  of  the  West  Chicago 
Street  Railroad  Company  to  an  inquiry  of  the  Civic  Federation  as  to  the  cost  per 
mile  of  their  cable  road,  to-wit:  "Estimated  cost  per  mile  of  track  (cable),  includ- 
ing rails,  conduits,  pulleys,  vaults,  and  necessary  machinery  for  operating  the  same, 
$75,000  single  track." 


156  MUNICIPAL    AFFAIRS. 

Of  the  entire  17.47  miles  single  track  cable  road  built  by  the 
U.  S.  Construction  Co.  only  1.23  miles  were  West  Chicago  St.  R.  R. 
Co.  mileage,  the  balance  being  2.836  miles  Chicago  Passenger  Ry. 
Co.  and  13.404  miles  Chicago  West  Division  Ry.  Co. 
Sec.  U.— Construction  Charges  in  Detail. 

The  total  charges  to  construction  account  between  October 
20,  1887,  and  December  31,  1894,  or  prior  to  the  introduction  of 
the  trolley  system,  aggregated  $7,002,390.87,  divided  as  follows: 
17.47  miles  single  track  original  cable  system,  including  buildings,  ma- 
chinery, equipment,  etc.,  built  by   U.    S.    Construction   Company, 
$4,000,000,  divided  as  follows : 

13.404  miles  Chicago  West  Division  Railway  Company $2,207,955.82 

2.836  miles  Chicago  Passenger  Railway  Company 466,056.26 

1.230  miles  West  Chicago  Street  Railroad  Company 203,710.09 

17.470  miles.    Total  at  $164,723.65 $2,877,722.19 

Three  power  houses  and  machinery 998,277.81 

155  grip  cars 124,000.00 

Total    $4,000,000.00 

As  already  explained  the  agreement  of  March  15,  1889,  with 
the  Chicago  Passenger  Ry.  Co.  stipulates  that  the  cost  of  convert- 
ing the  2.836  miles  old  horse  track  of  the  Chicago  Passenger  Ry. 
Co.  into  cable  road  was  to  be  paid  by  the  West  Chicago  St.  R.  R. 
Co.,  so  that  of  the  total  $4,000,000  paid  to  the  U.  S.  Construction 
Co.  under  the  original  cable  contract  $1,792,044.18  was  chargeable 
to  the  West  Chicago  St.  R.  R.  Co.  and  $2,207,955.82  to  the  Chicago 
West  Division  Ry.  Co. 

Taken  in  connection  with  their  answer  to  a  more  general  inquiry  as  to  the  cost 
of  all  building  and  equipping  of  new  lines  and  extension,  to-wit :  "It  is  impossible 
to  give  statement  as  asked  for  itemized,  as  the  construction  and  equipping  of  new 
lines  has  been  charged  to  the  general  construction  account,"  would  seem  to  indicate 
that  the  officials  of  the  West  Chicago  Street  Railroad  Company  have  apparently  no 
clearly  defined  idea  themselves  as  to  the  actual  cost  value  of  their  property,  or  at 
least  have  not  yet  fully  determined  upon  a  uniform  answer  to  all  inquiries. 

Their  estimate  of  $75,000  per  mile  for  cable  road,  while  more  reasonable  than  the 
contract  price  of  $164,723.65  or  the  price  indirectly  stated  by  Mr.  Yerkes,  $382,240, 
is  unreliable  and  of  no  more  value  than  their  estimate  of  the  average  cost  of  trolley 
road,  to-wit:  "Estimated  cost  per  mile  of  track  (electric),  including  rail  construc- 
tion, bonding,  poles,  and  all  necessary  wiring,  together  with  a  complete  feeder  system 
and  necessary  underground  electric  conduits,  $50,000  single  track,"  as  the  books 
themselves  show  that  the  cost  to  construct  the  latter  kind  of  road  is  less  than  half 
their  estimate.  Elsewhere  in  this  report  reasons  are  fully  set  forth  why  the  actual 
cost  per  mile  single  track  of  the  Blue  Island  avenue  and  Halsted  street  and  Van 
Buren  street  lines,  to-wit:  $96,455.43,  should  be  accepted  as  a  safe  estimate  of  the 
cost  of  the  Madison  street  and  Milwaukee  avenue  cable  lines,  and  that  amount  has 
been  adopted  as  the  approximate  cost  per  mile  of  the  cable  road,  built  by  the  U.  S. 
Construction  Company,  in  preparing  the  final  schedule  of  the  cost  value  of  the 
existing  property  of  the  company. 


CHICAGO   STREET   RAILWAYS.  157 


Subsequently  0.635  m^e  single  track  cable  road  was  built  at 
a  cost  of  $88,405.56,  or  at  the  rate  of  $139,221.27  per  mile,  and 
11.655  miles  single  track  at  a  cost  of  $1,124,188.06,  or  at  the  rate  of 
$96,455.43  per  mile,  and  charged  as  follows: 

0.314  mile  Chicago  Passenger  Railway  Company  .................       %43,7^5-S^ 

0.321  mile  Chicago  West  Division  Railway  Company  .............        44,690.05 

11.655  miles  Chicago  West  Division  Railway  Company  ............    1,124,188.06 

Total    ..........................................................  $1,212,593.62 

56.676  miles  single  track  horse  road  was  also  built  as  follows: 
4.396  miles  Chicago  Passenger  Railway  Company  ................     $104,737.66 

1.96  miles  Chicago  West  Division  Railway  Company  ............  46,698.51 

50.32    miles  West  Chicago  Street  Railroad  Company  ..............    1,132,178.36 

Total    ......................................................  $1,283,614.53 

During  the  same  period  there  was  also  charged  into  construc- 
tion account,  as  already  stated,  the  following  items  : 

Taylor  street  bridge  .............................................     $100,000.00 

Taylor  street  viaduct  ............................................          7,654.55 

Halsted  and  Kedzie  street  viaducts  ...............................          2,427.88 

Ogden  avenue  ...................................................          7,861.90 

Madison  street  new  steel  rails  and  asphalt  ........................        52,376.18 

Franchise  petitions  ..............................................      207,321.37 

Interest  and  discount  on  bonds  ...................................      128,540.84 

Total    .....................................  ......  .  ..........    $506,182.72 

To  recapitulate,  the  $7,002,390.87  charged  to  construction  ac- 
count between  October  20,  1887,  and  December  31,  1894,  as  stated 
above  in  detail,  was  on  the  following  accounts  : 

Chicago  Passenger  Railway  Company  ............................    $148,453.17 

Chicago  West  Division  Railway  Company  ........................    3,423,532.44 

West  Chicago  Street  Railroad  Company  ..........................    3,430,405.26 

Total    ......................................................  $7,002,390.87 

Subsequently  there  was  charged  to  construction  account  $2,- 
605,296.60  on  account  of  the  construction  of  173.555  miles  single 
track  electric  roads,  including  the  conversion  of  old  horse  roads 
into  electric  roads,  as  follows: 

2.01    miles  Chicago  Passenger  Railway  Company  at  $24,204.17.  .  .      $48,650.00 
26.575  miles  Chicago  Passenger  Railway  Company  at  $18,573.46...      493,589.00 

28.585  miles  total  Chicago  Passenger  Railway  .....................    $542,240.00 

25.970  miles  West  Chicago  Street  Railroad  Company  at  $18,573.46 

(estimated)    ..........................................      482,352.00 

54-555  miles  total  new  electric  road  ..............................  $1,024,592.00 

119.00  miles  single  track  horse  road  converted  into  electric 
road  at  $11,985.48  per  mile,  $1,426.272.49,  divided  as  follows: 


158  MUNICIPAL    AFFAIRS. 

68.68  miles  Chicago  West  Division  Railway  Company $825,163.04 

50.32  miles  West  Chicago  Street  Railroad  Company 601,109.45 


119.      miles.      Total $1,426,272.49 

Into  the  same  account  was  also  charged  $154,431.28  for  inter- 
est and  discount  on  bonds. 

Following  is  a  summary  of  the  total  charges  to  construction 
account  down  to  December  31,  1897: 

Account  Chicago  Passenger  Railway  Company $690,693.24 

Account  Chicago  West  Division  Railway  Company 4,248,695.48 

Account  West  Chicago  Street  Railroad  Company 4,668,298.75 

Total    $9,607,687.47 

It  will  be  noticed  that  of  the  total  expenditures  to  Decembei 
31,  1897,  it  has  been  necessary  to  estimate  only  the  cost  of  25.97© 
miles  of  new  trolley  road  built  for  the  Chicago  West  Division  Ry. 
Co.  The  basis  for  this  estimate  is  the  rate  per  mile  for  road  of  a 
precisely  similar  character  built  in  the  same  year  for  the  Chicago 
Passenger  Ry.  Co.  and  made  the  subject  of  arbitration,  as  fully 
set  forth  elsewhere  in  this  report. 

Deducting  the  amount  named  in  this  report  of  the  arbitrators 
as  chargeable  to  the  Chicago  Passenger  Ry.,  to-wit:  $542,240.07, 
and  the  amount  estimated  above  for  the  25.970  miles  of  road 
chargeable  to  the  Chicago  West  Division  Ry.  Co.,  also  the  item  of 
$154,431.28  for  interest  on  bonds,  leaves  a  balance  of  $1,426.272.49 
out  of  the  total  $2,605,296.60,  to  cover  the  cost  of  converting  1 19 
miles  of  horse  road  into  trolley,  which  would  be  at  the  rate  of  $n,- 
985.48  per  mile. 

As  this  rate  is  approximately  the  cost  per  mile  of  similar  roads 
on  the  North  and  South  side  lines,  exclusive  of  paving,  it  is  assumed 
that  in  the  conversion  of  the  1 19  miles  of  horse  road  mentioned  the 
old  pavement  already  down  was  allowed  to  remain,  and  thus  its 
original  cost  value  became  incorporated  into  the  total  cost  value 
of  the  complete  trolley  road  of  the  present  day,  and  showing  the 
cost  of  the  West  Side  trolley  road  as  follows: 

2.01    miles  single  track  at  $24,204.17 $48,650.39 

26.575  miles  single  track  at    18,573.46 493.589-68 

68.68    miles  single  track  at    18,006.10 1,236,658.97 

25.97    miles  single  track  at    18,573.46 482,352.76 

50.32    miles  single  track  at    17,148.08 862,891.20 

173-555  miles,  average  at       $18,000.88 $3,124,143.00 


CHICAGO    STREET    RAILWAYS.  159 

Sec.  \2—  Mileage  of  West  Side  Lines. 
Chicago  Passenger  Railway—  Miles,  S.  T. 

Horse  road  at  date  of  lease,  November  16,  1888 29.79 

New  horse  road  built  by  West  Chicago  Street  Railroad  Company  for 
account  of  Chicago  Passenger  Railway  Company  since  lease,  Novem- 
ber 16,  1888 4.40 

Chicago  West  Division  Railway — 

Horse  road  at  date  of  lease,  October  20,  1887 98.45 

New  horse  road  built  by  West  Chicago  Street  Railroad  Company  for  ac- 
count of  Chicago  West  Division  Railway  since  lease,  October  20,  1887.  1.96 

West  Chicago  Street  Railroad- 
New  horse  road,  built  since  lease,  October  20,  1887 50.32 

New  cable  road 1.23 

New  electric  road 25.97 

Total    212.12 

Since  the  lease  of  October  20,  1887,  tne  following  changes 
have  been  made  in  the  character  of  the  roads  included  in  the  above 
mileage,  viz: 

Chicago  Passenger  Railway—  Miles,  S.  T. 

Original  horse  road 29.79 

Converted  into  cable  road 3.15 

Converted  into  electric  road 24.185 

Transferred  to  Chicago  City  Railway,  Madison  to  Washington  streets 

on  Michigan  avenue 0.075 

Horse  road  still  remaining 2.38 

Chicago  West  Division  Railway- 
Original  horse  road 98.45 

Converted   to  cable  roads 25.38 

Converted  to  electric  roads 66.72 

Transferred  to  Chicago  City  Railway,  to  State  on  Lake  (450  ft.) 

Horse  road  still  remaining 6.26 

West  Chicago  Street  Railroad  Company — 

New  horse  road,  built  since  the  lease  of  October  20,  1887  and  afterward 

converted  into  electric  road 50.32 

New  horse  road  built  for  account  of  West  Division  Railway  since  lease, 

October  20,  1887,  afterward  converted  into  electric  road 1.96 

New  horse  road  built  for  account  of  Chicago  Passenger  Railway  since 

lease,  October  20,  1887,  afterward  converted  into  electric  road 4.40 

Add  new  cable  road  built 1.23 

Add  new  electric  road  built 25.97 

Total    406.190 

If  from  the  above  totals  is  deducted  the  860  feet  of  single  track  road  trans- 
ferred to  the  Chicago  City  Railway  and  to  the  remainder  is  added  457  feet  of 
double  track  or  914  feet  of  single  track  road  acquired  from  the  North  Chicago 
Street  Railroad  and  already  referred  to  in  the  exhibit  as  forming  part  of  the  exist- 
ing mileage  of  the  West  Chicago  Street  Railroad  the  remainder  will  be  1,120,044.2 
feet,  or  212.13  miles,  single  track,  distributed  as  follows : 


This,  however,  includes  many  items  that  must  be  deducted  in  order 
to  arrive  at  the  value  of  visible  assets,  or  property  necessary  to  the 
operation  of  the  roads.  The  distinction  must  be  recognized  between 
the  value  of  the  assets  as  used  to  determine  the  basis  of  capitalization 
and  the  items  relating  solely  to  construction  and  equipment,  which 
alone  indicate  the  investment  in  creating  the  property.  Among  the 
former  are  found  the  following: 

North  Chicago  Company. 

Cash $554,225.16 

Due  from  Garden  City  Construction  Co 150,000.00 

Various  bonds i,39Q,65o.oo 

Stocks 10,500.00 

Bills  receivable: 

West  Chicago  Street  R.  R.  Tunnel  Co 1,500,000.00 

Other  bills  receivable 397,300.00 

Accounts  receivable 221,520,61 

Suspense 22,092.58 

$4,255,288.35 
West  Chicago  Company. 

Due  from  feeder  lines  and  connections $785,305.29 

Accounts  receivable 1,027,920.90 

Bills  receivable . 86,962.98 

Stocks  and  bonds 3,302,264.00 

$5,202,460.26 
Chicago  City  Railway  Company. 

Auditorium  stock,  estimated  value $2,500.00 

Chicago  Exhibition  Company  bonds , 10,000.00 

Accounts  receivable 16,268.20 

Cash  on  hand  and  in  bank 540,088.14 

$568,856.34 
Total  of  all  roads $10,026,604.95 

This  sum  deducted  from  the  $41,328,379.72.  of  existing  assets  as 
shown  above  leaves  $31,301,774.77  as  the  cost  value  of  the  tangible 
property  constituting  the  plants  of  the  three  systems  December  31, 
1897. 

The  West  Chicago  Street  Railroad  Tunnel  Company  property  is 
not  included,  as  the  tunnel  is  leased  to  the  West  Chicago  Company, 
which  guaranteed  any  deficiency  between  the  rents  received  and  the 
interest  on  the  bonds  or  other  debts  of  the  tunnel  company. 

The  statement  for  operations  for  1898  given  out  by  the  Chicago 
City  Railway  company  shows  gross  earnings  of  $4,832,806,  operating 
expenses  $2,926.490;  net  earnings,  $1,906,316.  After  deducting  the 
cash,  stocks,  bonds  and  accounts  receivable  from  the  existing  assets 


of  the  company,  there  remained  on  December  31,  1897,  $11,035,104.37 
as  the  cost  value  of  the  physical  assets.  The  net  earnings  for  1898 
amount  to  17.26  per  cent,  on  this  sum. 

The  statement  of  the  North  Chicago  Street  Railroad  company  for 
1898  showed  gross  receipts,  $3,015,323;  operating  expenses,  $1,390,681; 
net  earnings,  $1,624,642.  The  total  tangible  property  of  the  two  com- 
panies composing  the  north  side  system,  after  deducting  securities, 
accounts,  cash,  etc.,  is  shown  by  the  report  to  be  $6,422,398.12.  The 
net  earnings  for  1898  are  25  per  cent,  on  this  sum. 

The  statement  of  the  West  Chicago  Street  Railroad  Company  for 
1898  showed  gross  receipts  $4,031,903,  operating  expenses  $2,017,946, 
net  earnings  $2,013,957,  which  is  i8.il  per  cent,  on  the  $11,113,679  of 
tangible  assets  at  cost  value  of  the  three  companies  composing  the 
west  side  system  December  31,  1897,  securities,  accounts,  etc.  being 
deducted. 

The  total  net  earnings  from  operation  (not  income)  of  the  three 
systems  for  1898  were  $5,544,915,  or  17.7  per  cent,  on  the  $31,301,774.77 
actual  cost  value  of  the  combined,  properties. 

Items  Which  Are  Eliminated. 

In  trying  to  arrive  at  the  increase  in  cost  value  of  physical  assets 
in  roads  and  equipments,  made  since  December  31,  1897,  no  account 
is  taken  of  the  items  of  track  renewal,  equipment,  repairs,  etc.,  as  it  is 
clear  that  these  expenditures  must  have  replaced  such  parts  of  the 
properties  listed  in  the  report  as  had  worn  out  or  otherwise  become 
useless.  But  from  the  statement  of  the  City  Railway  Company  Janu- 
ary I,  1901,  it  appears  that  it  had  increased  its  electric  mileage  since 
December  31,  1897,  by  the  addition  of  about  thirty-one  miles  of  trolley, 
which  at  the  price  computed  by  Mr.  Bard  represented  an  outlay  oi 
about  $650,000,  and  it  is  learned  that  the  company  also  expended 
$65,000  for  land,  the  site  of  a  proposed  new  power  house.  Together 
these  add  $715,000  to  the  assets  of  the  company.  The  showing  of  the 
Union  Traction  Company  in  1900  charges  $116,688  to  construction 
account,  and  $158,922  to  real  estate;  in  its  statement  for  the  year  ending 
June  30,  1901,  there  appears  $110,927.94  charged  to  construction  and 
$147,410.19  to  real  estate  and  buildings,  a  total  of  $533,948  added  to 
the  tangible  assets  during  the  two  years'  life  of  the  Union  Traction 
Company.  The  combined  expenditures  of  this  character  by  both 
companies  since  the  Civic  Federation  investigation  ended  amount  to 
$1,548,948  and  swell  the  total  of  the  cost  value  of  the  tangible  assets 
of  the  west,  the  north  and  the  south  side  systems  to  $32,850,722. 


exchange  the  first  two  weeks  of  July.  It  is  conceded  by  well-informed 
authorities  that  this  is  a  fair  method  of  computation,  as  prices  of 
securities  during  that  time  were  at  a  moderate  level,  being  neither 
unusually  high  nor  under  specially  depressing  influences. 

Securities'  Market  Value. 

The  market  value  of  outstanding  securities  of  the  Chicago  City 
Railway  company,  Union  Traction  company  and  underlying  com- 
panies is  as  follows: 

West  Chicago  Street  Railroad  Co.  (at  par) $  9,989,000 

Chicago  West  Division  Railway  Co.  ( at  650) 4,061,850 

Chicago  Passenger  Railway  Co.  (at  par) 610,300 

North  Chicago  Street  Railroad  Co.  ( at  200) '. .  1 1,840,000 

North  Chicago  City  Railway  Co.  (at  600) 1,499,400 

Union  Traction  Co.,  pf d.  ( at  60) 7,200,000 

Union  Traction  Co.,  com.  (at  19) 3,800,000 

Chicago  City  Railway  Co.  (at  209 ) 37,620,000 

Bonds  assumed  by  Union  Traction  Co.,  being  various  issues 

of  underlying  companies  25,777,000 

Market  value  of  all  outstanding  securities $102,^97,550 

Cost  and  inventory  value  of  tangible  assets 32,850,722 

Franchises  (market  value) $  69,546,828 

(This  method  of  determining  franchise  values  is  in  accordance  with  state  laws, 
and  has  been  approved  by  the  courts.) 

Bondi  Listed  at  Par. 

The  bonds  are  put  in  at  par,  although  some  of  them  recently  have 
scored  quotations  considerable  better,  the  North  Chicago  City  railway 
4^s  being  at  108  on  July  3,  and  the  North  Chicago  Street  railroad  55 
at  104}^  the  same  date.  On  July  8-12  West  Chicago  Street  Railroad 
consols  55  were  at  103.  The  different  issues  of  bonds  bear  interest  at 
from  4*4  to  6  per  cent,  except  $500,000  North  Chicago  City  railway, 
which  are  4  per  cent.  As  explained  elsewhere  the  Chicago  City  Rail- 
way company  now  has  no  bonds  out. 

If  it  should  be  contended,  as  is  frequently  the  case,  that  the  actual 
value  of  securities  cannot  be  determined  by  market  quotations  on  rela- 
tively a  few  shares  or  that  the  stock  exchange  is  not  a  fair  criterion 
for  fixing  values, .it  may  be  pointed  out  that  in  not  a  few  instances 
heavy  private  sales,  involving  transfer  of  control,  have  been  made  at 
above  'change  quotations  of  the  time.  This  was  the  case  when  in 
1886-87  Mr.  Yerkes  and  his  associates  bought  controlling  interests  in 
the  Chicago  West  Division  Railway  company  and  the  North  Chicago 
City  Railway  company. 


According  to  the  agreed  value  placed  upon  the  32,000  shares  o 
West  Chicago  and  20,000  shares  of  North  Chicago  stock  which  the 
Union  Traction  company  bought  of  Mr.  Yerkes  and  deposited  with 
the  Illinois  Trust  and  Savings  Bank,  it  must  have  been  so  in  that 
memorable  deal  in  1899.  The  stocks  are  all  paying  dividends,  as  before 
stated,  on  a  5  and  6  per  cent  basis,  except  the  shares  of  the  Union 
Traction  company.  That  company  began  paying  the  5  per  cent  on  its 
preferred  shares;  but  passed  the  dividend  for  the  last  half  of  its  last 
fiscal  year  and  has  not  resumed.  And  in  any  event  these  issues  figure 
only  $11,000,000  of  the  enormous  sum  total  of  $102,397,550. 

Union  Traction  Gross  Receipts. 

According  to  the  statement  of  the  Union  Traction  company  for 
the  year  ending  June  30,  1901,  gross  receipts  from  operation,  advertis- 
ing and  rents,  but  not  including  income  from  stocks  and  bonds,  were 
$7,366,227;  operating  expenses,  $3,942,194;  net  earnings,  $3,424,033; 
gross  earnings  of  the  City  Railway,  as  per  its  last  statement,  December 
31,  1900,  $5,543,180;  operating  expenses,  $3,655,002;  net  earnings, 
$1,888,178,  atotal  of  $5,302,211,  which  is  16.14  per  cent  on  the  $32,850,- 
722  of  tangible  assets  at  cost  value,  or  at  the  value  carried  on  the 
books  of  the  companies,  including  such  additions  as  have  been  made 
since  December  31,  1897,  when  the  Civic  federation  examination 
ended. 

The  annual  interest  charges  on  the  bonds  appearing  in  the  market 
value  of  securities  is  $1,244.595.  After  payment  of  these  there  remains 
of  the  net  earnings,  $4,057,616,  or  5.28  percent  on  the  $76,620,550  mar- 
ket value  of  stocks. 

With  these  figures  in  view,  showing  cost  and  inventory  value  of 
tangible  assets  necessary  to  the  operation  of  the  roads,  gross  receipts 
from  operation,  rental  and  advertising,  the  net  earnings  above  operat 
ing  expenses  and  market  value  of  all  the  securities  outstanding,  what 
would  appear  to  be  reasonable  remuneration  to  the  public  or  the  city, 
or  both,  for  the  continued  enjoyment  by  the  present  companies  of 
franchises? 

A  little  experimental  figuring  may  be  helpful  in  determining  this 
problem.  As  there  are  many  different  opinions  as  to  the  methods  of 
remuneration,  as  well  as  to  the  amount,  it  will  be  well  to  see  what  the 
results  would  be  according  to  different  plans. 

Capitalization  and  Market  Value, 

Of  the  market  value  of  outstanding  securities  the  Chicago  City 
Railway  company  represents  $37,620,000,  the  Union  Traction  company 


$64,577»55°»  while  of  the  total  value  of  tangible  assets  the  former  shows 
$11,750,000,  the  latter  $21,100,722.  The  capitalization,  however,  is 
another  thing.  The  City  Railway  company  has  $18,000,000  of  capital 
stock,  against  its  $11,750,000  of  tangible  assets;  the  Union  Traction 
company  has  $49,394,100  capital  stock  outstanding  and  $25,777,000 
bonds  (assumed), a  total  of  $75,171,100,  against  its  $21,100,722  of  tangi- 
ble assets.  It  should  be  noted,  also,  in  this  connection,  that  the  per- 
centage of  net  earnings  on  value  of  tangible  assets  is  practically  the 
same  with  both  companies,  being  about  16.17  Per  cent  f°r  the  City  Rail- 
way company  and  16.5  per  cent  for  the  Traction  company.  The  fol- 
lowing percentages  are  obtained  by  treating  all  of  the  properties  as  a 
single  system. 

Deductions   from   Earnings. 

Gross  earnings  of  the  City  Railway  company  and  Union  Traction 
company  are  $12,909,407.  If  remuneration  were  10  per  cent  of  gross 
receipts  the  municipality  would  get  $1,290,940,  and  $11,618,467  would 
remain  with  the  companies.  Interest  on  bonds,  $1,244,595,  and  operat- 
ing expenses,  $7,597,196,  deducted  leave  $2,776,676,  or  8.45  per  cent  on 
the  $32,850,722  of  existing  tangible  assets.  It  is  3  6  per  cent  on  the 
market  value  of  all  the  outstanding  capital  stock,  $76,620,550.  The 
value  of  the  franchise,  as  indicated  by  the  market  value  of  the  securi- 
ties, is  $69.546,828.  The  net  earnings  are  equal  to  an  average  dividend 
upon  the  whole  market  value  of  outstanding  securities  of  5.18  percent. 
That  percentage  on  the  franchise  value  amounts  to  $3,602,525.  In 
other  words,  this  is  the  proportion  of  the  net  earnings  that  must  be 
credited  to  franchises.  Ten  per  cent  on  gross  earnings  is  but  little 
more  than  one-third  of  this  amount,  and  it  would  be  difficult  to  discern 
in  such  terms  any  injustice  to  the  corporations. 

In  1900  the  City  railway  carried  110,843,202  passengers  and  the 
Union  Traction  company  carried  during  its  fiscal  year  ending  June  30, 
1900,  149,521,755,  a  total  for  both  of  260,364,957.  In  its  last  report 
the  Traction  company  makes  no  statement  of  passengers  carried,  but 
acknowledges  a  considerable  falling  off  on  the  north  side  owing  to 
the  new  elevated  road  competition.  The  City  Railway,  however,  re- 
ports considerable  gain  the  first  half  of  the  current  year,  and  it  may 
fairly  be  assumed  that  the  total  will  not  fall  below  260,000,000  for  1901. 
Those  who  believe  that  the  public  and  not  the  city  government  should 
have  the  full  benefit  of  remuneration  to  be  required,  and  favor  re- 
duced fares,  may  figure  it  out  in  this  wise: 


Receipts  and  Operating  Expenses* 

At  a  straight  3-cent  fare  present  traffic  as  quoted  above  would 
yield  a  gross  revenue  of  $7,800,000.  In  the  last  statements  of  the 
companies  there  are  incomes  from  advertising  and  rentals  amounting 
all  told  to  $113,947,  and  assuming  they  are  the  same  now  they  swell 
the  gross  earnings  to  $7,914,974.  Operating  expenses  amount  to 
$7,597,196,  according  to  the  statements,  and  interest  on  outstanding 
bonds  $1,244,595,  a  total  of  $8,841,791,  or  $926,871  more  than  gross 
earnings. 

While  it  may  be  taken  into  consideration  that  a  3-cent  fare  would 
result  in  an  increase  of  traffic,  it  must  also  be  borne  in  mind  that  the 
territory  covered  by  these  companies  is  very  large  in  proportion  to  the 
population,  resulting  in  a  higher  percentage  of  operating  expenses 
than  in  more  compact  cities.  The  tendency  of  growth,  too,  is  con- 
stantly toward  a  further  extension  of  suburbs  in  all  directions  rather 
than  the  rapid  covering  of  vacant  lots  within  more  easy  distances  of 
the  business  center. 

It  is  frequently  suggested  that  a  3-cent  fare  during  the  rush  hours 
morning  and  evening,  and  commutation  tickets  at  the  rate  of  six  for 
25  cents,  twelve  for  50  cents,  and  twenty-five  for  $i,  and  a  more  lib- 
eral transfer  system,  with  a  5~cent  fare  otherwise  would  be  the  least 
concession  that  the  public  is  entitled  to,  irrespective  of  such  percent- 
age of  gross  earnings  as  the  city  may  demand.  This,  it  is  suggested, 
would  probably  average  at  about  a  4-cent  fare  for  the  whole  traffic. 
Whether  or  not  this  is  correct  it  is  impossible  to  determine  from  the 
data  at  hand;  probably  it  is  not  far  wrong. 

Figured  on  the  business  indicated  above  an  average  4-cent  fare 
would  amount  to  $10,400,000.  Add  income  from  rentals  and  adver- 
tising, $113,947,  and  there  would  be  total  gross  earnings  of  $10,513,947. 
Deduct  operating  expenses,  $7,597,196,  and  $2,916,751  remains  equal 
to  about  9  per  cent  on  the  $32,850,772  of  tangible  assets  or  $1,672,156 
over  the  interest  of  $1,244,995  on  tne  outstanding  bonds  added  to  the 
operating  expenses.  This  is  equal  to  a  dividend  of  5.09  per  cent  on 
the  cost  and  inventory  value  of  the  existing  tangible  assets.  It  is  the 
equivalent  of  over  2  per  cent  on  the  $76,620,550  market  value  of  the 
outstanding  stocks,  and  2.48  per  cent  on  the  face  value,  $67,394,100, 
of  the  same,  including  the  $32,000,000  irrigation  of  the  Union  Traction 
Company. 

Bonds  Represent  Five^Sixths. 

When  it  is  remembered  that  the  cost  value  of  the  existing  tang- 
ible assets  (including  paving)  necessary  to  and  used  in  the  operation 


of  the  roads — and  we  wish  to  emphasize  the  fact  that  this  is  the  key 
to  the  whole  matter— is  only  $7,000,000  more  than  the  outstanding 
bonds;  in  other  words,  that  the  bonds  represent  nearly  five-sixths 
of  the  original  cost  of  the  properties,  the  last  proposition  does  not 
appear  impossible. 

If,  however,  the  city  should  demand  in  addition  a  percentage  of 
gross  earnings  and  if  there  should  be  imposed  on  the  companies  in- 
creased obligations  in  the  way  of  paving,  street  cleaning  and  sprink- 
ling and  removal  of  snow,  the  complexion  of  the  above  exhibit  would 
be  changed.  Five  per  cent  on  gross  earnings  as  computed  at  an  aver- 
age 4-cent  fare  would  give  the  city  annually  $525,697.  Adding  opera- 
ting expenses  and  deducting  leaves  of  earnings  $2,391,054,  equal  to 
7.27  per  cent  on  cost  value  of  tangible  assets.  After  deducting  oper- 
ating expenses,  the  5  per  cent  of  gross  earnings  and  interest  on  bonds, 
there  would  be  left  $1,146,459,  equivalent  to  a  dividend  of  3.5  per  cent 
on  the  value  of  tangible  assets. 

Could  Offer  Lower  Fares. 

The  main  thing  to  note  is  that  on  the  traffic  handled  under  present 
faulty  conditions — inadequate  car  equipment  and  antiquated  motive 
power  on  their  principal  lines — the  companies  could  make  concessions 
to  the  public  equal  to  a  reduction  to  an  average  4-cent  fare,  pay  oper- 
ating expenses  and  pay  into  the  city  treasury  5  per  cent  of  their  gross 
earnings  and  have  left  an  equivalent  of  7.27  per  cent  on  cost  value  of 
their  tangible  assets;  or  do  this  and  also  provide  for  the  interest  of 
from  4  to  6  per  cent  on  outstanding  bonds  and  have  left  a  sum  equal 
to  3.5  per  cent  on  the  cost  value  of  their  existing  tangible  assets.  It 
is  not  indulging  in  speculation  to  say  that  the  increase  of  business  that 
must  accrue  from  service  improved  to  a  state  of  efficiency  in  keeping 
with  the  demands  of  the  situation,  and  from  the  60,000  to  80,000  annual 
increase  of  population,  would  materially  increase  the  percentage. 


VC  25055 


THE  UNIVERSITY  OF  CALIFORNIA  UBRARY 


